Economic Growth

2017
The economy has continued to grow at a modest pace. According to the latest Real Gross
Domestic Product (GDP) growth data released by the Uganda Bureau of Statistics (UBOS),
the economy is estimated to grow by 3.9 per cent in 2016/17, 0.6 PPs lower than the period
revised projection of 4.5 per cent and 0.8 PPs lower than the outturn for FY 2015/16 of 4.7
per cent (Figure 12). The deceleration in growth is mainly due to the adverse weather
conditions that affected agricultural output, weak private sector credit growth and slow
implementation of government infrastructure projects. Growth in all sectors slowed, with
agricultural output declining to 1.3 per cent, from 2.8 per cent in 2015/16. The contraction
in the agricultural sector was on account of unfavourable weather conditions which affected
harvests of agricultural output. Industrial sector growth also slowed to 3.4 per cent, relative
to 4.7 per cent in the previous year due to a contraction in mining and quarrying and
construction subsectors.
Growth in services sector also slowed to 5.1 per cent, compared to 5.9 per cent in 2015/16
on account of marginal growth in trade and repairs, and a contraction in financial and
insurance activities. On the expenditure side, household consumer expenditure is estimated
to have grown by 4.3 per cent in 2016/17 compared to 1.7 per cent in 2015/16 while Gross
fixed capital formation declined by 1.8 per cent compared to growth of 8.9 per cent in the
same period.

An early warning indicator of economic activity, the Bank of Uganda’s Composite Index of
Economic Activity (CIEA), estimated 1.5 per cent growth in economic activity in the quarter
to May 2017 compared to an expansion of 0.7 per cent in the quarter to February 2017, and
an annual growth to May 2017 at 4.3 per cent. Industry and services sectors grew at lower
rates, while the agricultural output is estimated to have increased. Activity in the service
sector grew at the same rate as in the Quarter to February 2017, at 1.1 per cent, but grew
by 5.3 per cent, y-o-y, in May 2017, relative to 5.0 per cent in May 2016. Growth in
industrial activity moderated to 2.5 per cent in the quarter to May 2017, relative to 2.6 per
cent in the quarter to February 2017, and expanded by 10.1 per cent, y-o-y in May 2017.
Agricultural output is estimated to have slightly expanded by 0.2 per cent in the quarter to
May 2017, compared to a growth of 0.1 per cent in the quarter to February 2017, growing
by 1.1 per cent, y-o-y, in May 17.

2018
Growth has recovered and is trending above 6 percent in the medium term. Growth is
estimated to have accelerated to 6.1 percent in FY2017/18, from 3.9 percent in FY2016/17
driven mostly by services and a rebound in agriculture from the previous year’s draught. The
services sector is estimated to have grown by 7.7 percent with industry and agriculture
following closely at 6.3 percent and 3.7 percent, respectively. However, manufacturing grew
at a slow pace of 1.7 percent. For FY2018/19, growth is projected above 6 percent, as
manufacturing, services and construction continue to expand, while the base effect in
agriculture fades. Over the next 3‒5 years, growth could reach 7 percent, if infrastructure
and oil sector investments are on track. Indeed, the high frequency real economy indicators
project that domestic economic growth momentum continued into the first quarter of FY
2018/19. Indeed, the IHS Markit’s Purchasing Managers Index (PMI) for November indicated
improved business conditions.
The PMI also indicated stronger operating conditions amid higher output and new orders, it
noted that “Despite rising output costs for firms, the strong momentum of domestic
demand is counterbalancing this.” The Bank of Uganda’s composite index of economic
activity (CIEA) also indicates stronger performance in the quarter ended October 2018. The
CIEA grew at a rate of 3.6 percent in the 19 | P a g e quarter to October 2018, higher than
the 2.3 percent registered in the quarter to July 2018 as depicted in Figure 11. The growth
was mainly registered in the services and industry sectors.
The CIEA trend suggests annualised growth rate of 7-8 percent in 2018 implying that growth
in FY2018/19 could be higher than the previous 6 percent projection. This is supported by
the lagged effect of the accommodative monetary policy previously pursued, recovery in
private sector credit, capital inflows from foreign direct investment, and buoyant business
and consumer sentiments.

2019:

Preliminary GDP estimates by Uganda Bureau of statistics (UBOS) indicate that the economy
expanded at 6.1 percent in FY 2018/19 compared to the 6.2 percent registered in 2017/18.
Economic growth was supported by accommodative monetary policy stance, growth in the
private sector, fiscal stimulus, strong domestic demand, improvement in the agriculture
sector as a result of favourable weather conditions and growth in public infrastructure
developments. The growth was partly as a result of strong final household consumption
expenditure. Growth in final consumption expenditure more than tripled to a growth of 13.6
per cent in FY 2018/19 mainly driven by final household consumption. However, real GDP
growth was weighed down by a significant reduction in net exports. Net exports reduced as
the volume of goods and services exported plunged by 36.4 per cent. The fall in exports
reflects a slowdown in global demand and thus demand for Uganda’s exports whilst imports
were supported by the buyout domestic demand. Similarly, growth in gross fixed capital
formation especially by the private sector slowed down to 4.8 per cent from 10.3 percent in
2017/18 mainly on account of the decline of investment in machinery. Figure 12 depicts the
real GDP growth by expenditure.