Macroeconomic Forecasting Using Machine Learning Methods: An Application to Uzbekistan

This paper provides the first systematic assessment of machine learning methods for macroeconomic forecasting in Uzbekistan. Using a comprehensive dataset of more than 170 indicators, we forecast CPI inflation and GDP growth with nine machine learning models and compare them against three traditional benchmarks (ARIMA, VAR, and BVAR). For both targets, the relative performance of machine learning improves as the forecast horizon increases. For inflation, machine learning provides clear and growing gains as the horizon increases, and a simple equal-weighted ensemble of the machine learning models is the most accurate approach overall, achieving the lowest forecast error at nearly every horizon. For GDP growth, by contrast, the traditional benchmarks (ARIMA in particular) remain the most accurate across most horizons, although regularized linear and dimension-reduction machine learning methods are competitive at short horizons. Tree-based models struggle to forecast GDP when growth exceeds the range observed during training because they cannot extrapolate beyond the training data. This limitation is particularly relevant in Uzbekistan's rapidly changing economy, where rapid economic growth in 2024-2025 pushed the level of GDP beyond the range observed in the training sample. We show that forecasting stationary transformations of the target largely removes this weakness. Overall, the findings suggest that machine learning is best used to complement rather than replace the existing forecasting toolkit. It improves the accuracy of medium-term inflation forecasts, whereas traditional models remain more accurate for forecasting GDP.