Uganda’s economy has recently grown at a slower pace, reducing its impact on incomes and poverty reduction. Average annual growth was 4.5% in the five years to 2016, compared to the 7% achieved during the 1990s and early 2000s. The slowdown was mainly driven by adverse weather, unrest in South Sudan, private sector credit constraints, and the poor execution of public projects.
However, the economy rebounded in the latter half of 2017, driven largely by growth in information and communication technology (ICT) services and favorable weather conditions for the agricultural sector. Real gross domestic product (GDP) growth is expected to be above 5% in 2018 and could rise further to 6% in 2019. This outlook assumes continued good weather, favorable external conditions to boost demand for exports and an increase in foreign direct investment (FDI) inflows as oil production draws closer, and capital investments executed as planned.
Reliance on rain-fed agriculture, however, remains a downside risk to growth, the poor’s income, as well as export earnings. Tax collections are below expectations and fiscal pressures are rising. Meanwhile, delays and poor management of the public investment program could prevent the productivity gains expected from enhanced infrastructure, while an acceleration in domestic arrears may have an adverse impact on private investment and further limit the extension of credit.
Finally, regional instability and a continued influx of refugees could undermine exports and disrupt growth in refugee hosting parts of Uganda. Potentially intensifying conflicts in South Sudan and the Democratic Republic of Congo (DRC), currently Uganda’s 2nd and 4th top export destinations, could negatively affect the growth of Uganda’s exports. Lower exports, taxes and overall growth, will have implications for debt sustainability and the current account.
Source: World Bank
