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Uganda Country Risk Report Q3 2016

  • May 2016
  • -
  • Business Monitor International
  • -
  • 43 pages

Core Views Uganda's real GDP growth will slow in 2016 as elevated inflation weighs on private consumption and rising capital goods imports widen the goods trade deficit. However, the economy will rebound modestly in 2017, on the back of robust fixed investment and monetary easing. Further monetary easing over the next two years will stimulate economic growth. However, we expect the Bank of Uganda to remain cautious, therefore we forecast that reversal of last year's tightening cycle will progress into 2017. Uganda will record a current account deficit of 11% of GDP in fiscal year 2016/17 as the continued investment in infrastructure increases demand for capital goods imports. The associated improved trade and transport links in addition to a future oil exploration project mean that the long-term outlook is much more positive.

Table Of Contents

Uganda Country Risk Report Q3 2016
Executive Summary 5
Core Views5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Inflation To Dampen 2016 Growth8
Uganda's real GDP growth will slow in 2016 as elevated inflation weighs on private consumption and rising capital goods imports widen
the goods trade deficit However, the economy will rebound modestly in 2017, on the back of robust fixed investment and monetary
easing
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS9
TABLE: PRIVATE CONSUMPTION FORECASTS9
TABLE: GOVERNMENT CONSUMPTION FORECASTS10
TABLE: FIXED INVESTMENT FORECASTS10
TABLE: NET EXPORTS FORECASTS10
Fiscal And Public Debt Outlook 10
Deficit To Widen Despite Enhanced Tax Revenues10
Uganda's Ministry of Finance will miss its target of a 64% of GDP deficit in fiscal year 2016/17 We forecast a wider deficit of 68%,
predicated on heavy infrastructure spending and inefficiencies in the tax system
Structural Fiscal Position 11
TABLE: MAIN REVENUE and EXPENDITURE CATEGORIES12
External Trade And Investment Outlook 13
Record Infrastructure Spending To Stretch Deficit Further13
Uganda will record a current account deficit of 11% of GDP in fiscal year 2016/2017 as the continued investment in infrastructure
increases demand for capital goods imports The associated improved trade and transport links in addition to a future oil exploration
project mean that the long-term outlook is much more positive
Monetary Policy 14
Focus On Growth Will Lead To Additional Rate Cuts14
Further monetary easing over the next two years will stimulate economic growth However, we expect the Bank of Uganda to remain
cautious, therefore we forecast that reversal of last year's tightening cycle will progress into 2017
Monetary Policy Framework 15
Currency Forecast 16
UGX: Slower Pace Of Depreciation In 201616
The Ugandan shilling will undergo a more gradual pace of depreciation in 2016 and 2017 than in 2015 due to a relatively weaker dollar
That said, given large external and fiscal imbalances, we see little scope for any meaningful appreciation over the medium term
TABLE: BMI CURRENCY FORECAST16
Chapter 2: 10-Year Forecast 19
The Ugandan Economy To 2025 19
A Decade Of Promise But Also Of Risk19
We forecast robust real GDP growth averaging more than 70 % 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
TABLE: LONG-TERM MACROECONOMIC FORECASTS19
Chapter 3: Political Outlook 21
SWOT Analysis 21
BMI Political Risk Index 21
Museveni's Fifth Term To Bring Short-Term Stability22
Yoweri Museveni's re-election in Uganda's February presidential elections will ensure policy continuity and support the passage of inves
tor-friendly regulations in the years ahead However, we see rising risks that the leader will attempt to remain in power beyond this term,
increasing the potential for widespread social unrest or substantial legi slative gridlock
TABLE: POLITICAL OVERVIEW 22
Long-Term Political Outlook 23
Political Challenges For Museveni Ahead23
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 4: Operational Risk 27
SWOT Analysis 27
Operational Risk Index 27
Operational Risk 28
TABLE: OPERATIONAL RISK 28
Economic Openness 29
TABLE: TOP FIVE IMPORT PARTNERS and PRODUCT IMPORTS, 2011-2014, USDMN 29
TABLE: FREE TRADE AGREEMENTS30
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES30
Availability Of Labour 34
TABLE: SUB-SAHARAN AFRICA - AVAILABILITY OF LABOUR RISK 35
Chapter 5: BMI Global Macro Outlook 39
Global Macro Outlook 39
Tentative Stability, But New Risks Emerging39
TABLE: GLOBAL ASSUMPTIONS39
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 40
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % 41
TABLE: MACROECONOMIC DATA and FORECASTS 43

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