Real return: what you earn after inflation

A deposit that pays 20% a year sounds generous. Whether it really is depends on what happens to prices over the same year. If prices rise 10%, your money grows, but what it can buy grows by much less. The return after inflation is called the real return, and it is the number that tells you whether your savings are actually getting ahead. This guide explains how to calculate it, how tax changes it, and how to use it when you compare savings and investments in Uzbekistan.

Nominal and real returns

The nominal return is the percentage your money grows in soʻm: the rate on a deposit, the coupon yield on a bond, or the change in a share's price plus its dividends.

The real return is how much your purchasing power grows: the nominal return adjusted for the rise in prices over the same period.

An illustrative example with round numbers. You deposit 10,000,000 soʻm at 20% for a year and receive 12,000,000 soʻm. Over the year, prices rise 10%, so a basket of goods that cost 10,000,000 soʻm now costs 11,000,000 soʻm. With your 12,000,000 soʻm you can buy about 1.09 of those baskets. Your purchasing power grew by about 9%, not 20%.

The simple and the exact formula

The quick approximation, often called the Fisher approximation, subtracts inflation from the nominal rate:

Real return ≈ nominal return - inflation.

In the example: 20% - 10% = 10%.

The exact formula divides instead of subtracting:

Real return = (1 + nominal) ÷ (1 + inflation) - 1.

In the example: 1.20 ÷ 1.10 - 1 = 0.0909, or about 9.1%.

The approximation is close when both numbers are small. When rates and inflation are high, as they have often been in Uzbekistan, the difference becomes noticeable, so the exact formula is worth the extra step.

When the real return is negative

If inflation is higher than the nominal return, you lose purchasing power even though the soʻm amount grows. An illustrative example: cash in a current account earning 0% while prices rise 10% has a real return of 1 ÷ 1.10 - 1, about -9%. A deposit at 8% with inflation at 12% has a real return of 1.08 ÷ 1.12 - 1, about -3.6%.

This is why money left idle for years quietly shrinks. Inflation and your savings shows the long-term effect.

Adding tax: the after-tax real return

Tax is taken from the nominal return, before inflation is considered. As of September 2026, under the Tax Code:

• Bank deposit interest and income on Uzbek government securities are not taxed for individuals (Article 378, items 12 and 13).
• Dividends and interest, including coupons on corporate bonds, are taxed at 5% for residents (Article 381).
• Gains on issue-grade securities sold on a stock exchange are not taxed for individuals (Article 378, item 7).

An illustrative comparison with inflation at 10%:

• A deposit at 20%, not taxed: real return 1.20 ÷ 1.10 - 1, about 9.1%.
• A corporate bond with a 20% coupon, taxed at 5% of the coupon: net nominal 19%, real return 1.19 ÷ 1.10 - 1, about 8.2%.

Tax on the nominal amount means tax on the part of the return that only compensates for inflation, which makes the effect of tax on the real return larger than it looks. Tax on dividends and bond coupons covers the rules.

Where to find inflation figures

In Uzbekistan the official consumer price index is published by the national statistics agency on stat.uz. The Central Bank of Uzbekistan (CBU) conducts monetary policy with an inflation target of 5% and publishes its inflation analysis on cbu.uz. The CBU's policy rate is its main tool for moving interest rates in the economy towards that target.

The chart compares the CBU rate with annual inflation over the past decade. When the rate is above inflation, savers in soʻm have a positive real return on instruments that follow it; when it is below, they lose ground. For the effect of the rate on deposits and loans, read CBU refinancing rate.

Remember that the official index is an average basket. Your own inflation depends on what you spend on: food, rent, imported goods or education.

Using real returns in decisions

1. Compare investments in real terms. A 22% deposit and a 16% deposit are both worth comparing to expected inflation, not to each other alone.
2. Use after-tax figures. Especially when comparing a tax-free deposit or government bond with a taxed corporate bond or dividend share.
3. Match the period. Compare a one-year return with inflation over the same year, not with last year's figure.
4. Think about currency. A dollar deposit has its own real return, which depends on dollar inflation and on the exchange rate if you spend in soʻm.
5. Set real goals. When you plan for a goal years away, express it in today's money and aim for a positive real return.

The paid Real returns feature on Finmind calculates what a sum of soʻm is really worth between two dates using the official monthly consumer price index from stat.uz, and says plainly when the index does not cover a date.

This article is for education only and is not investment advice. Investing in securities involves risk, including the loss of money you invest.