From today’s Absa 2023 AFMI Economic Forum, I summarize some of the key points that have been raised and their impact to the Uganda’s economy.
Economic Growth Amid Fiscal Questions
Despite fiscal uncertainties, Uganda's economic growth outlook remains upbeat. The impact of the Covid-19 pandemic on the Ugandan economy is still evident, but the country has shown resilience. As of now, Uganda's economy is approximately 17% larger than it was pre-Covid, although it had been expected to be about 12% larger than it is currently
The Real GDP in 2019 was UGX 126 Trillion which has grown to over UGX 168 Trillion by June 2023.
Sectoral Performance
Growth has returned above the long-term average, but there are significant differences across various sectors of the economy. The primary sector, including agriculture and mining, has shown robust growth. The service sector, including trade & repair, real estate, education, and communication, has also performed well. However, the transport sector has seen a decline.
Inflation and Monetary Policy
Inflation in Uganda has fallen from over 10% a year ago to below 3% currently. The fall in food inflation to zero has been a significant contributor to this overall inflation decline. The Central Bank of Uganda's Monetary Policy Committee (MPC) notes some upside risks to the inflation outlook, including geopolitical tensions, volatile global financial markets, and weather conditions. However, the MPC is more likely to keep the policy rates unchanged until these risks taper.
Debt Sustainability
Debt service costs have risen relative to pre-Covid-19 levels across the region, including Uganda. The IMF's Debt Sustainability assessment for Uganda is currently at 'Moderate risk'. The IMF has outlined a message of fiscal reform via five key focus points: re-anchoring fiscal policy, undertaking fiscal adjustment, mobilizing more domestic revenue, strengthening budget institutions, and anticipating public resistance to reforms.
Currency Performance
Despite foreign reserves being under pressure, the Ugandan Shilling has been among the best African FX performers. The currency is forecasted to show further resilience over the next 12 months.
Key Watchpoints
Looking ahead, several factors will be critical to watch for Uganda. These include inflation trends and the Bank of Uganda's response, developments in oil and the East African Crude Oil Pipeline (EACOP) construction, which is the anchor for the projected Country growth in the coming years.
I keenly followed and I agree with you Arthur, the shilling is stable that's encouraging for the economy
This is a good time for Uganda.
- The shilling has indeed remained strong over some period.
We pray that inflation remains well managed.
Once it starts rising, those who own assets (appreciating assets) are the ones who benefit.
So it's imperative for one to invest the financial markets to benefit at any opportune time.