Bank of Uganda forecasts 8% economic growth but warns of global risks

Kampala. Uganda’s economy is expected to grow by about 8 percent in the medium term, the Bank of Uganda (BoU) has said, reflecting strong optimism about the country’s economic prospects.

Presenting the February Monetary Policy Statement in Kampala on Monday, BoU Governor Dr Michael Atingi-Ego said the growth will be driven by increased government spending on major projects, oil and infrastructure developments, economic support programmes, improved global conditions, careful management of interest rates, and expanding private sector activity.

“Notwithstanding the favourable outlook, risks to the growth projection are tilted to the downside. These include evolving geopolitical tensions, which could slow global growth, disrupt trade routes and supply chains, and push up commodity prices, particularly oil,” Dr Atingi-Ego said.

He added that these risks are largely global, pointing to rising geopolitical tensions, possible supply chain disruptions, and higher oil prices, all of which could affect Uganda’s economic growth. On the upside, stronger-than-expected investment in the extractive sector, a robust global recovery, and easing trade tensions could lift growth above projections.

Interest rate unchanged

Owing to ongoing uncertainties, the central bank has kept the Central Bank Rate (CBR) at 9.75 percent, a level that has remained unchanged for 14 months. Dr Atingi-Ego said the decision helps keep inflation under control, supports steady growth, and prevents sharp fluctuations in the economy. He added that future adjustments will depend on economic data and global developments.

“Without compromising its primary objective of price stability, the policy stance also supports smoothing economic fluctuations and fostering socio-economic transformation,” the Governor said.

Uganda’s economy grew by an average of 6.3 percent during the first three quarters of 2025, driven mainly by government spending, which rose 22.8 percent, and household consumption, which increased 14.2 percent. While growth slowed slightly by September 2025, indicators suggest stronger activity toward the end of the year. The economy is projected to expand between 6.5 and 7 percent in the 2025/26 financial year.

Inflation outlook

The BoU slightly revised its inflation forecast downward due to a stronger shilling and lower international oil and food prices. Inflation is expected to remain slightly below the target in 2026, within a range of 3.8 to 4.3 percent, before stabilising around the medium-term target.

Dr Atingi-Ego said prudent monetary policy, a stable exchange rate, and moderating global commodity prices underpin the outlook, although risks such as strong domestic demand, weak exchange rates, global conflicts, and adverse weather remain.

Global context

The International Monetary Fund (IMF) recently projected global growth at 3.3 percent in 2026 and 3.2 percent in 2027, slightly higher than its October 2025 forecast. The IMF noted that technology investment, fiscal and monetary support, accommodative financial conditions, and private sector adaptability are offsetting trade policy shifts.

Global inflation is expected to ease, although US inflation will gradually return to target. Policymakers are urged to restore fiscal buffers, preserve stability, and implement structural reforms. The IMF also projected that growth in sub-Saharan Africa will rise from 4.4 percent in 2025 to 4.6 percent in 2026 and 2027, supported by macroeconomic stabilization and reforms in key economies.