The economy is projected to grow between 6 percent and 6.5 percent in the near term, with expectations of surpassing 7 percent in subsequent years, according to the Bank of Uganda’s Monetary Policy for June.
Michael Atingi-Ego, the Deputy Governor of the Bank of Uganda, highlighted several key factors underpinning this optimistic outlook. He cited a recovery in consumer demand, increased investment in infrastructure, and a favorable external environment.
The government’s strategic initiatives to enhance the agricultural sector, improve industrial production, and boost the services sector are also anticipated to significantly contribute to this growth trajectory.
“The economy has demonstrated remarkable resilience and adaptability,” Atingi-Ego stated. “Our projections indicate we are on a solid path to achieving substantial economic growth, bolstered by strategic government initiatives and private sector engagement.”
However, Atingi-Ego noted that Uganda faces challenges such as 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 decreasing international reserves,” he said.
Atingi-Ego emphasized the importance of maintaining macroeconomic stability, ensuring sustainable public debt levels, and fostering a business and investment-friendly environment. “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, expected to open new markets for Ugandan products and attract foreign investment, were also underscored. 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,” the report states. “The inflation forecast has been slightly revised downwards relative to the April 2024 round, largely due to a less depreciated shilling exchange rate.”
Experts have consistently 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. Atingi-Ego also stressed the importance of inclusive growth, ensuring that the benefits of economic expansion are widely shared across all segments of society.
Nonetheless, the monetary policy report indicates that uncertainties persist around the inflation outlook. These include potential impacts from escalating geopolitical tensions in the Middle East, possible energy price hikes, unfavorable weather patterns affecting food supply, and production capacity pressures. The realization of these risks could lead to stronger inflationary pressures.
Meanwhile, the Bank of Uganda Monetary Policy Committee forecasts a lower inflation rate of between 5 and 5.4 percent for the next financial year, with the shilling 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.
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