Central Bank tags Uganda’s growth in 2024 on oil, PDM, agriculture

Bank of Uganda has revealed that the Ugandan economy is projected to grow to 6.0% in 2024 supported by continued investment in the oil and gas sector and government investments in growth-enhancing programs such as PDM and other infrastructures

According to the State of the Economy report for December 2023, the Ugandan economy has remained resilient even though borrowing costs have increased globally and access to financing has been restricted.

The report says the economy in 2024 will continue recovering from the current 5.2% supported by the continued recovery of activity in the industry, agriculture, construction, and services.

In the medium term, growth is projected at 7% driven by oil production and export activities.

Inflation has also moderated to 2.6% due to good harvests and lower global commodity prices. The Ugandan Shilling has been relatively stable against the US dollar.

Nevertheless, the report says growth outlook remains uncertain, with the balance of risks tilted to the downside.

“Economic growth might face a slowdown due to several factors: adverse weather conditions impacting agricultural production, financial constraints on budgetary spending caused by high external finance costs, restricted household consumption and private investments due to tight domestic credit conditions, and potential spikes in global commodity prices triggered by escalating geopolitical tensions, particularly in the Middle East,” the report states.

Also, slower global and regional economic activity due to high-for-longer interest rates and lower trade could lead to lower external demand for Uganda’s exports, which could constrain aggregate demand further.

On the upside, domestic growth could surpass baseline projection if inflation in advanced economies declines faster than expected prompting the loosening of monetary policies or weather conditions to turn out favorable.

The Uganda shilling remains relatively stable against the US dollar despite the recent bouts of depreciation pressures in the quarter to November 2023.

Although the unit depreciated by 2% during the review quarter to a mid-rate of 3,782.0 in November 2023, it was 1.2% stronger compared to the level in the three months to November 2022. The losses sustained by the shilling during the quarter were largely due to higher corporate demand, mainly from the oil, telecommunication, and manufacturing firms amid continued outflow of portfolio capital and bearish sentiments over the expected outflows from proceeds of the Airtel Initial Public Offer (IPO)