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Uganda Business Forecast Report Q1 2015

  • November 2014
  • -
  • Business Monitor International
  • -
  • 36 pages

Core Views

While economic conditions in Uganda are steadily improving following several years of lacklustre growth, the pace of the recovery is proving slower than expected. The ongoing conflict in South Sudan (a key trade partner) is acting as a major drag on Ugandan exports, while the economy is also still feeling the lingering effects of the 2011-2012 downturn in the banking sector. The sacking of Prime Minister Amama Mbabazi puts President Yoweri Museveni firmly on course to secure a fifth term in office in Uganda's 2016 general elections. Nevertheless, the move will fuel tensions and harden divisions within the ruling party that will need to be managed carefully by the president if repercussions are to be minimised.
Uganda will sustain a sizeable fiscal shortfall in the range of 4.0%- 6.0% of GDP over our 2015-2019 forecast period as efforts to boost a narrow tax base are more than offset by heavy public investment in infrastructure and persistent recurrent spending pressures. Inflation in Uganda will rise modestly in 2015 but stay largely contained, averaging 7.0% year-on-year (y-o-y) growth compared to an expected 6.4% in 2014. Headline price growth will continue to be anchored by the relatively favourable outlook for food prices and a subdued external price environment. That said, currency concerns will dictate a wait-and-see approach to monetary policy over the coming months.

Major Forecast Changes

We have made some downward revisions to our economic growth forecasts. We now expect real GDP growth to come in at 5.2% in 2014, compared to 6.3% previously, and by 5.7% in 2015, compared to 6.4%.

Table Of Contents

Uganda Business Forecast Report Q1 2015
Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Index 7
Domestic Politics 8
Museveni Makes Ambition Clear With PM's Sacking 8
The sacking of Prime Minister Amama Mbabazi puts President Yoweri Museveni firmly on course to secure a fifth-term in office in
Uganda's 2016 general elections. Nevertheless, the move will fuel tensions and harden divisions within the ruling party that will need to
be managed carefully by the president if repercussions are to be minimised.
Table: Political Overview 8
Long-Term Political Outlook 9
Political Challenges For Museveni Ahead 9
Uganda will face several challenges over the coming decade, including a presidential succession as well as the need to overcome
the legacy of civil war in the north and create jobs for its youthful population. That said, we maintain a positive outlook on Uganda and
foresee a relatively successful resolution of these challenges.
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Index 13
Economic Activity 14
On The Up, But Not At Potential 14
We maintain our view that economic growth in Uganda will accelerate over the next few years, driven by a fast-growing consumer
segment and accelerating investment into the infrastructure and extractive sectors. Still, we believe the outlook over the next one to two
years has softened slightly in recent months and we have made some downward revisions to our forecasts.
Tab le: Ec onomic Acti vity 14
Balance Of Payments 16
Rising Imports To Drive C/A Deficit Wider In 2015 16
A structural dependence on consumer and capital goods imports will keep Uganda's current account balance deep in the red over the
next few years. We predict that the current account deficit will widen in 2015 owing to a recovery in imports and the continued impact of
the South Sudan crisis on exports.
Table: Current Account 16
Monetary Policy 18
Currency Concerns Dictate Wait-And-See Monetary Policy 18
Despite low inflation and an economy yet to hit its straps, we believe that renewed currency concerns will see the BoU maintain a
neutral monetary policy stance until further notice.
Tab le: Moneta ry Policy 19
Fiscal Policy 20
Spending Ambition, Low Tax-Take To Keep Deficit Wide 20
Uganda will sustain a fiscal deficit in the region of 4.0%-6.0% of GDP over our 2015-19 forecast period as efforts to boost a narrow tax
base are more than offset by expansionary spending commitments.
Table: Fiscal Policy 20
Chapter 3: 10-Year Forecast 23
The Ugandan Economy To 2023 23
A Decade Of Promise But Also Of Risk 23
We are forecasting robust real GDP growth averaging more than 6.2% over our 10-year forecast period as private consumption and
agricultural exports continue to grow; the country starts producing oil; and electricity generation increases, which together have the
potential to stimulate non-agricultural sectors and reduce the country's energy import bill. That said, the country will remain vulnerable to
energy shortages and adverse unpreventable climatic conditions, certainly in the short term.
Tab le: Long -Term Mac roeconomic Forecasts 23
Chapter 4: Operational Risk 25
BMI Operational Risk Index 25
Operational Risk 26
Table: Operational Risk 26
Transport Network 27
Table: Sub-Saharan Africa Transport Network Risks 28
Economic Openness 31
Tab le: Sub -Saharan Africa Ec onomic Op enn ess Ris ks 32
Table: Exports 33
Chapter 5: BMI Global Assumptions 35
Global Outlook 35
Reality Check: Uncertainty Reigns 35
Tab le: Globa l Assumpti ons 35
Table: Developed States, Real GDP GrowtH, % 36
Tab le: BMI VER SUS BLOO MBER G CONSENSUS RE AL GDP GRO WTH FORE CASTS, % 36
Tab le: Em erging Markets , Real GDP Growt h, % 37

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