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.
Uganda's Ministry of Finance will miss its target of a 6.4% of GDP deficit in fiscal year 2016/17. We forecast a wider deficit of 6.8%, predicated on heavy infrastructure spending and inefficiencies in the tax system.
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.
Yoweri Museveni's re-election in Uganda's February presidential election will ensure policy continuity and support the passage of investor-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 legislative gridlock.
|e/f=BMI estimate/forecast. Source: BMI, UBOS, BoU|
|Real GDP growth, % y-o-y||4.7||5.6||4.8||6.0|
|Nominal GDP, USDbn||27.0||24.8||24.6||25.6|
|Consumer price inflation, % y-o-y, eop||2.1||8.5||5.3||5.5|
|Exchange rate UGX/USD, eop||2,765.00||3,800.00||3,700.00||4,000.00|
|Budget balance, % of GDP||-3.9||-4.4||-5.7||-6.0|
|Current account balance, % of GDP||-9.5||-10.9||-11.6||-11.7|
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