Preface

Starting in the late 1980s, the Uganda government has pursued a series of stabilization and pro-market structural reforms. The resultant macroeconomic stability, post-conflict rebound, and investment response generated a sustained period of high growth during 1987-2010. Real gross domestic product (GDP) growth averaged 7% per year in the 1990s and the 2000s, placing Uganda among the 15 fastest growing economies in the World. However, over the past decade, the country witnessed more economic volatility and the growth in gross domestic product (GDP) slowed to an average of just about 5%. With the population increasing at a rate of at least 3% per annum. Through these decades, per capita income growth decelerated from a rate of 3.6% to about 2%.

Uganda’s economy has experienced a slowdown in growth due to the severe impact of the COVID-19 (coronavirus) pandemic crisis, a locust invasion and flooding caused by heavy rains. Uganda’s real gross domestic product (GDP) in 2021/22 is projected to be between 5.0 and 6.0% compared to 3.0 and 4.0% in 2020/21. Exports, tourism, remittances, foreign direct investment and portfolio flows shrunk during the second half of FY20 due to international trade disruptions and restrictions of movement of people. This has created significant fiscal and external imbalance, and a deceleration in growth in services, primarily in real estate activities and information and communications technology. 

The 2020 lockdown measures imposed to curtail the spread of the corona virus have had an adverse impact on economic activity. Preliminary outturn figures for real GDP growth for FY2019/20, recently released by the Uganda Bureau of Statistics (UBOS) indicate that economy expanded by 3.1%, less than the projection of 6.3% at budget time.

Nevertheless, this is much better than projections for most countries in sub-Saharan Africa, many of which will record negative growth in 2020. In addition, a number of key macroeconomic variables, including inflation, exchange rates, and private sector credit performed well despite the COVID pandemic.

Going forward, take off of a huge public investment programme and resumption of private sector economic activity in the post-election era is expected to drive growth. This notwithstanding, the effects of a volatile global economy on demand for Uganda’s exports and timing of key infrastructure projects in the country’s oil sector could offset any benefits of improved terms of trade due to low oil prices.

Annual Headline inflation reduced to 3.7% in November 2020 from 4.5% the previous month, driven by prices of transport services which increased but at a declining rate, and a drop in prices for liquid fuels, vegetables and fruits. There was an improvement in the level of economic activity as agriculture, industry, wholesale & retail and service sectors posted increases in output and new orders.

Sentiments about doing business in Uganda remained positive, particularly for the agriculture sector.

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