UGANDA : Economic Perspectives

Uganda is one of the most economically resilient African country facing the Covid-19 crisis, with a GDP growth forecast at 3.5% in 2020. However, the country faces many difficulties that slow down its development :
• Its demographic growth is among the highest in the world (3.6%)
• Due to the drop in tourism, its current balance deficit is expected to worsen to 9.9% of GDP in 2019/20 against 8.6% the previous year
• Due to the widening of public deficit (from +0.7 point to 7.7% of GDP), its public debt is expected to reach 51.5% of GDP by 2021 against 45.1% in 2019.

A structural transformation of the economy has been done in order to develop the tertiary
sector :
• While it employs only 20% of the working population, the Tertiary Sector dominates the economy with 46% of value added in 2019.
• The Secondary sector is now equal to Agriculture each representing 27% in the breakdown of GDP.
• Though it only represents 27% of the GDP, the Primary Sector still concentrates 73% of the working population against 7% for industry.

With a population of 42.72 million inhabitants, the 8th most populous country in Africa, Uganda is the 3rd economy in the East African Community (EAC) and the continent’s 17th richest country with a GDP of USD 36.5 Billion. During the 2000’s, GDP growth was at 7.5% the it slowed down to 2.5% in 2012 before returning to around 5.0% since. The population explosion undermines the strategy “Uganda Vision 2040” targeting a per capita income of USD 9,500 in 2040, that is ten times more than today. Such a target would require an annual growth of 15% by 2040. With a poverty rate of 41.7% in 2016 (56.4% in 2006), the country remains at the bottom of the HDI ranking (159th/189) and 1/3 Ugandans still live in extreme poverty, especially in the North and East regions. Besides, of the 700,000 young people entering the labor market each year, only 90,0000 find a formal employment.

On a Demographic point on view, 75% of the population live in the South half of the country. Uganda is made-up at Bantous, nilotics and many Rwandans, Sudanese and Congolese refugees. 84% the population is Christian (half catholic and evangelical), 12% is Muslim, and 4% has traditional beliefs. Population density is 213 inhabitants per km² with life expectancy
at birth of 59.2 years (SSA average is 60.5 years). On an Economical point of view, due to the Covid-19 crisis, GDP growth is expected to decrease at 3.3% in 2020 against the 6.0% previous prevision. This decrease is mainly explained by :
• Supply chains problems that penalizes industrial production, infrastructures and trade
• Fall in demand of major commercial partners, in particular China and India (about 30% of Uganda’s imports)
• Stop of tourist activities
• Social distancing measures slow down the activity, in particular Services
• The depreciation of local currency by 5.7% against the USD to reduce the effect of capital flight.

The table below represents Uganda’s foreign trade from 2016 to 2019 (in USD million) :
• After a significant drop (-15%) between 2012 and 2016, Imports increased by 51.5% over the 2016-2019 period : top 1 are mineral products (excluding products from oil companies), 20.1% of total imports in 2019, they were multiplied by 9.7.
• After a drop of 5.7% from 2013 to 2015, Exports have increased by 53.6% since 2015 : top 1 are Gold exports, 30.7% of total exports in 2019, they were multiplied by 35.2.

For the following periods of 2010/20 and 2020/21, although trade deficit is expected to improve to 6.5% of GDP from 8.4% in 2018/19, the huge fall in imports compared to that of exports will deteriorate the balance of services (-3.9% of GDP). The downward revision of inward FDI flows of 2.2 and 2.6% of GDP in 2019/20 will lead to the covering of only 2/3 of external financing. Despite the support from the IMF and the World Bank, foreign exchange reserves will be lowered to 3.5 months of imports, USD 434 million remaining for 2020/21. Public debt is 70% external, of which 72% multilateral and 28% bilateral. The debt remains mostly concessional with an average interest of 1.5%, but because of the pandemic crisis, there is a recent rise in bilateral debt. However, the IMF keeps the country’s risk of debt distress at “low”, even if it emphasizes the strong vulnerabilities. After estimating that the balance of risks to the inflation forecast are assessed to be on the upside with core inflation expected to exceed the 5% target within 12 months and GDP growth to remain below potential levels, the Bank of Uganda (BoU), at the Monetary Policy Committee meeting of August 2020 has maintained the Central Bank rate (CBR) at 7% while remaining committed to providing liquidity support to Supervised Financial Institutions. Consequently, the rediscount rate and the bank rate have been maintained at 10% and 11% respectively.
Find below the Interest rates in %

Find below the main products trades by Uganda in 2019

Find below the 10 first commercial partners of Uganda

Written on 01/09/2020


Please enter your comment!
Please enter your name here