Uganda sticks to 5 percent target despite global shocks
KAMPALA, JANUARY 11- A combination of high public investment and a more relaxed monetary policy stance should keep Uganda on track to achieve the 5 percent growth rate for 2016 despite uncertainty in the external sector
“Economic growth is projected to be moderate, with growth of 5 percent, driven by public investments and domestic demand as monetary policy is gradually eased in 2016. Inflation is projected to gradually decline and remain around 5 percent and the exchange rate is projected to remain stable,” says Dr Adam Mugume the executive director for research at the Bank of Uganda in an interview today.
Mugume maintains that overall, Uganda’s economic outlook remains positive though there are downside risks emanating from both the eternal and external environment.
Economic recession in the major emerging market economies, low private capital remittances and a tighter monetary policy by the Federal Reserve sum up the major concerns on the external horizon.
Internally however, the economy will continue to deal with pressures emanating from low export earnings and slow foreign direct investment in the first quarter of calendar 2016.
Uganda’s, revised downwards from an earlier forecast of 5.8 percent will be just above the World Banks forecast for Sub-Saharan Africa.
In its Global Economic Prospects for 2016, the World Bank said January 6, that Sub-Saharan Africa economic growth will accelerate to 4.2 per cent in 2016 as commodity prices stabilize.
“Economic activity will vary across Sub- Saharan Africa, with consumption growth remaining weak in oil exporting countries as fuel costs rise while lower inflation in oil importing countries helps boost consumer spending. Nigeria is forecast to expand 4.6 percent after growing by 3.3 per cent last year while South Africa is expected to advance only modestly to 1.4 percent growth from 1.3 per cent in the year just ended,” says the World Bank.
Growth in the East African Community is projected to be around 5 percent but the insurgency in Burundi could undermine prospects.
The Bank stresses that firmer growth ahead will depend on continued momentum in high income countries, the stabilization of commodity prices, and China’s gradual transition towards a more consumption and services-based growth model.
Developing economies as a group are forecast to expand by 4.8 per cent in 2016, less than earlier expected but up from a post-crisis low of 4.3 per cent in the year just ended.
“A combination of fiscal and central bank policies can be helpful in mitigating these risks and supporting growth. Although unlikely, a faster-than-expected slowdown in large emerging economies could have global repercussions. Risks to the outlook also include financial stress around the U.S Federal Reserve tightening cycle and heightened geopolitical tensions,” said World Bank Group Vice President and Chief Economist Dr Kaushik Basu.
Uganda goes to the polls on February18 in an election pitting President Museveni against seven challengers.