Tashkent, Uzbekistan (UzDaily.com) -- The Center for Economic Research and Reforms has analyzed how the zeroing of import duties on a number of food products will affect macroeconomic indicators. According to the director of the CERR, the zeroing of customs duties on certain types of consumer goods will have a double effect. It is expected that import prices for these types of products will decrease by more than 1%, and the remaining additional funds from the population will stimulate the growth of demand in the economy.

The National Media Center hosted a media briefing by the press secretary of the President of the Republic of Uzbekistan Sherzod Asadov for the media. It provides information about the events held last week with the participation of the President, as well as announced the most important upcoming decisions of the week.

A feature of this meeting was the participation in the event of senior officials of the Presidential Administration (AP) of the Republic of Uzbekistan, who presented their assessments of the reforms, analysis and review of key decisions being made, and also answered questions from journalists.

The event was attended by Adviser to the President on Youth, Science, Education, Health, Culture and Sports Odil Abdurakhmanov; expertise and comprehensive analysis AP Mansurbek Olloyorov.

It was noted at the event that the new format of meetings with media representatives will allow a deeper understanding and analysis of the strategic nature of large-scale transformations in our country. In continuation of the event, Sherzod Asadov recalled the event held on March 23 this year. videoconference on measures to increase food production. In particular, he noted that food inflation has remained at a high level in recent years. Rising prices for transportation, fertilizers and fuel also continue to affect the cost of food. Responding to these challenges, the head of state announced the introduction of zero duties on imports of 32 types of food products until 2024 (ed. note 36 types of food and goods), as well as the introduction of a procedure for refunding the amount of VAT paid for citizens from the social register.

The decision was made in order to strengthen the purchasing power of the population, meet its needs for basic food products, diversify global supply chains, and curb inflation.

In the process of preparing this document, the Information Policy and Public Relations Service of the Presidential Administration, as well as the Presidential Service for the Development of Economic Sectors, the Implementation of Investment and Foreign Trade Policy made a significant contribution to the study of the current situation and made their proposals.

Director of the Center for Economic Research and Reforms (CERR) Obid Khakimov spoke about the extent to which the measures taken will affect the well-being of the population, what is the expected result, and how these decisions will affect market prices in the domestic market.

“As you know, on 23 March, the President signed a decree on the introduction of zero rates of customs duties on the import of 32 types of food products. This is mainly due to the fact that, firstly, these products are the most widely used products in the consumption of the population, and products such as meat, cheese, pasta, apples are among the staples of our daily life. In 2022, about US$900 million worth of these goods were imported into our republic. More than 500 billion soums of customs duties have been paid on these products,” Obid Khakimov said.

According to the director of the CERR, the zeroing of customs duties on certain types of consumer goods will have a double effect.

“Firstly, when customs duties are reduced, imported products become cheaper, and as a result, the consumption of these products increases. We call this the exchange effect.

Secondly, since goods imported from one country are more expensive, the direction of trade also changes. That is, the geography of imports will change. We made our assessment based on how these measures will affect consumers in terms of these two effects.”

According to the director of the CERR, the zeroing of duties on these types of consumer goods will provide targeted support to the most socially vulnerable segments of the population and stimulate consumption by low-income households.

“For example, if we look at consumption in a single household, the analysis shows that these foods generally account for most of the income of low- or middle-income households. Including, these are pasta, eggs, butter, meat, cheese, apples, etc.

So, if the most vulnerable segments of the population, when buying only kefir, spend 5.6% of household expenses, then families with the highest incomes account for only 0.7% of expenses for the same commodity group,” the expert explained.

The results of the study show that the ratio of spending on these food items to income is 8-10 times higher for the poor than for the highest-income households.

According to CERR estimates, the zeroing of customs duties on these goods will increase imports of meat and meat products by US$4.8 million, cheese products by almost US$900,000, nuts by US$1.3 million, apples and pears by US$1. US$.9 million, fresh fruit US$1.6 million, chocolate US$4.7 million, confectionery US$1.2 million.

“From a macroeconomic point of view, as a result of an increase in imports, an increase in consumption by the population and a decrease in import prices for these types of products by more than 1 percent are expected,” Obid Khakimov emphasized.

Macroeconomic effects

The macroeconomic effects of zeroing customs duties were calculated by the CERR on the basis of a general equilibrium model for certain types of meat and dairy products, fruits, nuts, cereals, flour products, canned foods, chocolate, water, and textiles.

Another important point is that goods imported from the CIS countries are not subject to import customs duties in accordance with the Free Trade Area Agreement (FTA). Due to violations of transport and logistics chains, stoppage of production in the main supplier countries, Uzbekistan increased imports from third countries that are not members of the CIS FTA in respect of goods that are subject to import customs duty rates. This, in turn, leads to an increase in the cost of products in the domestic market.

The study revealed that 57% of products for the positions under consideration in 2022 were imported duty-free from the CIS countries, and customs duties were applied for the remaining 43% of imported consumer goods.

For reference: the calculations were carried out by the CERR together with the expert group of Berlin Economics

The results show that the zeroing of duties will lead to a modest increase in imports of consumer goods for these items by 6.7%. The largest increase in imports is expected for the following groups of goods: other meat and edible meat by-products; fresh, chilled or frozen fruits; apples, pears and quince, fresh; nuts; confectionery; chocolate; pasta; cheese products.

At the same time, import prices in the domestic market for these products are expected to decrease by 1.16 percentage points.

The analysis revealed a positive effect in the areas of accommodation and food services, transportation and storage, and a slightly less tangible positive effect in the wholesale and retail trade, as well as information and communications.

The innovation will allow the saving of additional funds from the population in the amount of 600 billion soums, which will stimulate the growth of domestic demand in the economy by 0.45 percentage points. and will have a multiplier effect on economic growth.

Impact on import flows

An assessment of the impact on trade flows showed that food imports from Russia, Moldova, Kazakhstan, Belarus, and Ukraine will decrease.

At the same time, an increase in imports from the EU is expected. The largest growth in imports among the EU countries will come from Poland, France, and Italy. Other countries with the most pronounced positive overall trade effects are Turkey, China and India.