The economy is projected to grow between 6 percent and 6.5 percent in the near term, with expectations of rising above 7 percent in subsequent years, Bank of Uganda’s Monetary Policy for June shows.
The Deputy Governor of the Bank of Uganda, Michael Atingi-Ego highlighted several key factors driving this optimistic outlook.
He cited a recovery in consumer demand, increased investment in infrastructure, and a favorable external environment.
The government’s strategic focus on enhancing the agricultural sector, improving industrial production, and boosting the services sector is also expected to contribute significantly to this growth trajectory.
“The economy has shown remarkable resilience and adaptability,” Atingi-Ego said.
“Our projections indicate that we are on a solid path to achieving substantial economic growth, which will be further bolstered by strategic government initiatives and private sector engagement.”
However, he said Uganda faces decreased capital outflows, headwinds to export growth and heavy external debt servicing partly due to rising global interest rates.
“This, combined with declining budget support, has resulted in declining international reserves,’’ Ating-Ego said.
Atingi-Ego emphasized the importance of maintaining macroeconomic stability, ensuring sustainable public debt levels, and fostering an environment conducive to business and investment.
“Policy consistency and prudent fiscal management will be crucial in sustaining this growth momentum,” he added.
The potential benefits of regional trade agreements and international partnerships, which are expected to open up new markets for Ugandan products and attract foreign investment.
Additionally, advancements in technology and innovation are anticipated to play a significant role in driving productivity and economic expansion.
‘’Looking ahead, inflation in FY2024/25 is projected to remain moderate, broadly reflecting stable demand conditions and contained cost pressures,” reads the report.
“The inflation forecast has been slightly revised downwards relative to the April 2024 round largely due to a less depreciation shilling exchange rate.’’
Experts have always called for continued efforts to address structural challenges, such as infrastructure deficits, skills gaps, and regulatory bottlenecks, to unlock the full potential of the Ugandan economy.
He also underscored the importance of inclusive growth, ensuring that the benefits of economic expansion are widely shared across all segments of society.
However, the monetary policy report indicates that uncertainties persist around the inflation outlook, including the potential impacts of an escalation of the ongoing geographical tensions in the middle east, possible energy price hikes, unfavourable weather patterns affecting food supply and production capacity pressures.
Materialisation of these risks could imply stronger inflationary pressures.
Meanwhile, the BoU Monetary Policy Committee forecasts a lower inflation rate of between 5 and 5.4 percent for next financial year as the shilling is expected to be more stable.
As Uganda prepares to embark on this promising growth path, the focus will be on implementing policies that support long-term development, enhance competitiveness, and improve the quality of life for all Ugandans.
With these strategic measures in place, Uganda is well-positioned to achieve and sustain robust economic growth in the coming years.
