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Uganda’s economy gets a positive nod
Crowded. People transact business on congested Luwum Street in downtown, Kampala, recently. PHOTO | DAVID LUBOWA
What you need to know:
- The World Bank’s global Economic Prospects indicate that Uganda’s economy and the one of the Democratic Republic of Congo will be the second fastest growing economy in the East African Community with a growth rate of 6.0 percent in 2024.
As the country awaits the reading of the 2024/2025 budget by Finance minister Matia Kasaija, the country has received a positive rating in prospects for the next financial year.
The World Bank’s global Economic Prospects indicate that Uganda’s economy and the one of the Democratic Republic of Congo will be the second fastest growing economy in the East African Community with a growth rate of 6.0 percent in 2024.
The latest Global Economic Prospects, the flagship of the World Bank released in Washington, DC on June 11, reveal that Rwanda is going to be the fastest growing economy in East Africa, growing at 7.6 percent in 2024, Tanzania at 5.4 percent, Kenya at 5.0 percent, Burundi at 3.8 percent, Somalia 3.7 percent and South Sudan at 2.0 percent.
The positive economic development in the region will lead to increased trade and improvement in people’s income arising from commodity products following the recovery from Covid-19 pandemic, which affected the economic activities and people’s health at its peak in 2020, 2021, and 2022.
Regarding the economic outlook at the continental level, the World Bank said growth in sub-Saharan Africa is projected to pick up from 3 percent in 2023 to 3.5 percent in 2024 and about 4 percent annually in 2025/2026, as fading inflationary pressures allow for interest rate cuts, which will support private consumption and investment.
“Growth in the region’s largest three economies is expected to accelerate from 1.8 percent in 2023 to 2.4 percent in 2024 and an average of 2.6 percent in 2025/2026. Yet, this is markedly below the region’s average growth,” said the World Bank.
The sub-Saharan Africa’s largest includes Nigeria, South Africa, and Angola, have all been weak in the past years. Growth in Nigeria is to bet at 3.3 percent, South Africa at 1.2 percent, and Angola at 2.9 percent in 2024.
“Non-resource-rich economies are forecast to maintain growth above their historical average rate, while resource-rich economies recover from their slow growth in 2023 that mainly reflected declining metal prices. Per capita GDP in sub-Saharan Africa is expected to grow, on average, by a meagre 1 percent this year and 1.4 percent in 2025/2026,” the World Bank explained.
The World Bank added: “While non-resource-rich economies are set to experience solid per capita GDP gains in the forecast period, the region’s three largest economies will remain below the region’s average. By the end of 2026, per capita GDP in about a quarter of sub-Saharan Africa economies will not have recovered to pre-pandemic levels, implying more than half-a-decade of lost progress in raising living standards and alleviating poverty.”
Risks
World Bank explains that risks to the outlook are tilted to the downside. Downside risks include increasing global geopolitical tensions, especially an escalation of the conflict in the Middle East; a further deterioration in regional political stability; and increased frequency and intensity of adverse weather events.
Higher-than-expected inflation; a sharper-than-expected economic slowdown in China; and increased government debt distress, especially if elevated public debt cannot be stabilised or new sources of financing do not become available.
The World Bank also pointed out that consumer price inflation could prove to be stickier than expected or pick up again driven, for example, by food price inflation caused by supply disruptions, possibly triggered by an escalation of the conflict in the Middle East.
“Furthermore, extreme weather events raise the likelihood of renewed upward pressure on food prices in affected economies. For instance, the current El Niño weather pattern has brought above-average rainfall and flooding to East Africa, but severe drought to southern Africa. An increase in the frequency and severity of droughts or floods would exacerbate poverty across sub-Saharan Africa and intensify food insecurity in many countries,” the World Bank said.
The World Bank said global growth is stabilising for the first time in three years and stated that global growth is projected to hold steady at 2.6 percent in 2024 before edging up to an average of 2.7 percent in 2025/2026. That is well below the 3.1 percent average in the decade before Covid-19.
The forecast implies that throughout 2024-2026, countries that collectively account for more than 80 percent of the world’s population and global GDP would still be growing more slowly than they did in the decade before Covid-19.
“Four years after the upheavals caused by the pandemic, conflicts, inflation, and monetary tightening, it appears that global economic growth is steadying,” said Dr Indermit Gill, the World Bank Group’s chief economist and senior vice president.
