Bank of Uganda headquarters in Kampala.

Bank of Uganda (BoU) has said the economy can steadily recover if a bigger population is vaccinated against Covid-19.

BoU Governor Emmanuel Tumusiime-Mutebile said the disruptions caused by the second lockdown set the economy back on its recovery path it had embarked on in early 2021.

“If vaccination picks up in the latter part of the year and movement restrictions are eased, this will allow for gradual economic growth recovery. Nonetheless, the lingering impact of the pandemic on private sector finances is expected to weigh on output over the next two years,” BoU said on Thursday, 12 August 2021.

As a result, BoU has maintained the Central Bank Rate (CBR) at 6.5 percent to stimulate the economy that is reeling from the effects of the second Covid-19 induced lockdown.

 “Economic growth is expected to noticeably slow down in the quarter to September 2021 due to the pandemic containment measures. Indeed, high-frequency indicators of economic activity indicate that the momentum of economic activity for the quarter to July 2021 subsided,” he said on Thursday, 12 August 2021.

The Governor said the Covid-19 restrictive measures that remain in place will continue to weigh on economic activity, with economic growth projected in the range of 3.5-4.0 percent in Financial Year (FY) 2021/22.

In particular, between Covid-19 stops and starts, tourism is unlikely to return to normal levels any time soon, he explained.

According to BoU, economic growth is projected to return to 6-7 percent in FY2024/25, indicating that the economic activity is expected to remain well below the pre-pandemic path for an extended time.

“A rebound of economic activity will be sustained by an acceleration in private consumption due to pent-up demand and strong growth in external demand which should contribute to a solid pickup in exports. In addition, a gradual return of tourism, the Final Investment Decision (FID) in the oil sector and broad-based improvements in business confidence should also provide support to growth,” BoU added.

Mutebile said the outlook continues to be highly conditional on the containment of the spread of the pandemic which will be premised on the vaccination rates and the extent to which SOPs are observed.

“The emergence of vaccine resistant variants would however prompt the reintroduction of restrictions on gatherings and mobility, which will derail the economic recovery. Conversely, reduced spread of the virus and a faster rollout of vaccines could speed up and strengthen economic recovery relative to current projections,” he explained.

Of the total of 1,143,763 people who have been vaccinated in the country, 902,992 received one dose and 240,771 received the two doses.

The Ministry of Health has received additional donations of 586,080 doses of Covid-19 vaccines. The jabs comprised 300,000 doses of Sinovac from the Chinese government and 286,080 doses of AstraZeneca from global sharing initiative –Covax.

BoU added that inflationary pressures remain benign largely reflecting the existence of spare capacity in the economy.

“The headline and core inflation averaged 2.4 percent and 3.4 percent, respectively, in 12 months to July 2021, which is below the BoU’s medium-term target of 5 percent. On the monthly basis, the annual headline inflation edged slightly higher to 2.1 percent in July 2021 from 2.0 percent in June 2021,” it said.