Economy to remain resilient

But risks to inflation including future direction of food crop prices, exchange rate prevail

Kampala, Uganda | JULIUS BUSINGE | Uganda’s economy is projected to grow faster this year subject to a number of fundamentals.

These include; continued investment in public infrastructure which will in turn have positive spillovers on private sector investment activity and spending and the growth in private sector credit.

In its latest monetary policy statement, Bank of Uganda said the country’s Gross Domestic Product grew between 7-8% in the first 10 months of 2018 and that it is expected to sustain growth in the coming years supported by the ongoing investment in public infrastructure.

The bank said economic growth in FY2018/2019 could be higher than the previous projection of 6%, with core and headline inflation forecast to peak to 6-6.5% and 5.1% in the second half of this year, which is lower than the previous forecast by 1 and 0.7 percentage points, respectively.

But in the medium term, core inflation outlook, the target for BoU’s monetary policy remains within the target of 5%.

However, there is a fear that the growth in private sector credit, though on a recovery path, remains below its historical trend and that its contribution to economic growth could be weighed down by increased public borrowing requirement and the associated further increase in interest rates.

The bank also says there are risks to inflation including the future direction of food crop prices, the path of the exchange rate that could affect this year’s economic growth.

Economic experts, however, have mixed views on the anticipated economic growth for this year.

Isaac Nkote from Makerere University Business School told The Independent that the economic activities could increase in 2019 partly supported by money for the 2021 elections that could start flowing in.

He also notes that the Supreme Court ruling on presidential age limit case would enable investors analyse the economic and political environment ahead of 2021 general elections before making their investment decisions.

The hearing of the age limit case is based on last year’s judgment of the Constitutional Court and is filed by several lawyers including Male Mabirizi.

Mabirizi and others are among other things opposed to the removal of the presidential age limit in the constitution.

Enock Twinoburyo, a senior economist at the Sustainable Development Goals Center for Africa in Kigali, Rwanda said he is optimistic that Uganda’s economy will perform better in 2019.

“2018 is a good foundation for a positive outlook in 2019,” he told The Independent.