Despite an improved outlook for the currency the Ugandan economy will, particularly through H116, feel the effects of the heavy currency depreciation that took place in 2015 via higher borrowing costs and elevated inflation.
An ambitious infrastructure spending programme and a failure to rein in recurrent spending will, despite improvement in revenue collection, see Uganda's fiscal balance remain deep in the red over the coming years.
We believe that the aggressive monetary tightening cycle that began in April 2015 has reached a peak. Barring a significant intensification of pressures on the currency through early 2016, we expect monetary conditions to be loosened from mid-2016 onwards.
There has been little apparent effort to rein in recurrent spending, which grew by nearly 15% in FY2014/15 compared to just a 5.6% increase in capital expenditure. While some of these spending demands will naturally die down post-election, we believe that fiscal indiscipline will remain a salient risk to the country's public finances in the medium term.
|Real GDP growth, % y-o-y||4.7||5.4||5.0||5.6|
|Nominal GDP, USDbn||24.2||21.9||21.7||22.7|
|Consumer price inflation, % y-o-y, eop||1.8||7.5||6.9||7.0|
|Exchange rate UGX/USD, eop||2,765.00||3,800.00||3,700.00||4,000.00|
|Budget balance, % of GDP||-4.4||-5.0||-6.5||-6.1|
|Current account balance, % of GDP||-10.6||-12.4||-13.2||-13.2|
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