World Bank upgrades Uganda’s growth to 6.2%
Traders and shoppers on Namirembe Road in downtown Kampala last year. The World Bank says Uganda’s growth is expected to accelerate as inflationary pressures subside. PHOTO | FILE
What you need to know:
- This GDP growth projection is slightly above the forecast of 5.5 percent it presented in the December 2022 edition.
The World Bank has revised its economic growth outlook for Uganda upwards, predicting that real Gross Domestic Product is likely to grow by about 6.2 percent during the current financial year.
This GDP growth projection is slightly above the forecast of 5.5 percent it presented in the December 2022 edition of the Uganda Economic Update.
In its Uganda Economic Update for last month themed: ‘Leveraging Sustainable Tourism to Support Growth & Diversification,’ which it shared with Daily Monitor yesterday, the World Bank explained that this upward revision reflects a more modest pass-through effect from high commodity prices to domestic inflation, an earlier-than-anticipated easing of key international commodity prices, and the dismissal of a lawsuit against TotalEnergies in March 2023 that may have slowed the development of the oil sector.
“The economy has proven resilient to recent shocks, and growth is expected to accelerate as inflationary pressures subside and the central bank eases monetary policy. The sustained push to commence oil production during FY24/25 has accelerated the construction of $20 billion in oil related infrastructure, and firms are close to concluding a financing arrangement to support oil production,” said the World Bank.
“However, non-oil private investment is expected to increase more modestly amid a difficult economic environment marked by volatile commodity prices, disruptions to global supply chains, tighter global financial markets, policy uncertainty, and a climate-driven increase in adverse weather events,” it added.
While presenting the National Budget for this fiscal year last year, Finance Minister Matia Kasaija said based on 11 key policy interventions Uganda’s economy is projected to grow at 6 percent in financial year 2023/2024.
In the report, the World Bank said overall growth is also expected to be moderated by the fiscal consolidation efforts and the phasing out of Covid-19 pandemic-related public investment programmes.
“Into the medium term, economic activity will be driven by private investment, oil exports, and the government’s efforts to promote tourism, export diversification, and agro-industry, causing the real GDP growth rate to return to its long-term trend of 6.0 to 7.0 percent,” said the World Bank.
However, on the other hand, the World Bank said the high cost of living will continue to dampen the recovery in employment and real household income, adding that while high commodity prices are expected to boost returns to cash crops, households that farm cash crops represent only a small share of all rural households due to the low level of commercialisation in the Ugandan agricultural sector.
On the current account, the World Bank said slowing global economic activity could hinder the growth of commodity exports, including coffee, maize, and tea, which had recently gained momentum. Solid growth could be sustained into the medium term if regional demand increases as consumers start substituting into high-value products from Uganda.
The World Bank cautions that non-concessional financing is likely to be limited as the authorities aim to maximise the use of concessional financing to limit the growth of the debt stock.
The World Bank said as the inflation outlook improves, the Bank of Uganda is expected to gradually ease monetary policy to support the economic recovery.
It also stressed that coping with uncertain global developments, unstable commodity prices, and climate shocks will require maintaining a delicate policy balance that supports economic activity without giving rise to new inflationary pressures.
