Uganda's growth will slow in 2016, with high borrowing costs weighing on consumer spending and a deepening net exports burden. Economic activity is set to rebound in 2017, as lower lending rates and relatively subdued inflation bolster private consumption, while a spate of major planned infrastructure projects bolster fixed investment.
Ugandan government debt will rise over the coming years as the authorities engage in an ambitious infrastructure spending programme. Although we believe that the increase in debt will be sustainable given improvements in revenue generation, the emphasis on non-concessional and foreign currency-denominated debt will test the government's creditworthiness over the coming years.
Uganda's central bank will continue monetary loosening, with the easing cycle continuing well into 2017. This is to counteract a more subdued growth outlook, and will be facilitated by more benign inflation coupled with the relative stability of the shilling.
Uganda's current account deficit will widen to 10.1% of GDP in 2016, and 10.3% in 2017, due to a ramp-up in capital imports for government infrastructure projects. Meanwhile, weaker remittance and aid flows will weigh on the income account.
The ruling National Resistance Movement party is likely to remove the presidential age limit from the Ugandan constitution this year, leading to a sharp uptick in popular protests and weighing on political stability in the coming quarters. Multilateral donors will likely react with disapproval to the amendment and resulting unrest, suggesting potential for aid to be pared back and increasing the risks to the country's already tenuous fiscal position.
|e/f=BMI estimate/forecast. Source: BMI, BoU, UBoS|
|Real GDP growth, % y-o-y||4.9||5.5||4.8||5.9|
|Nominal GDP, USDbn||28.2||27.5||26.6||28.5|
|Consumer price inflation, % y-o-y, eop||2.1||8.5||6.5||6.0|
|Exchange rate UGX/USD, eop||2,765.00||3,372.00||3,550.00||3,750.00|
|Budget balance, % of GDP||-3.8||-4.6||-6.7||-6.4|
|Current account balance, % of GDP||-8.5||-8.5||-10.1||-10.3|
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