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Can Uganda Grow at Bloomberg's 2% Forecast?

The economies of Ethiopia, Uganda, Ivory Coast, Egypt, Ghana, Rwanda and Kenya withstood the economic impact of the pandemic so successfully that they were among the world’s 10 fastest-growing in 2020. At least five of them are expected to remain in that elite growth club through 2022, according to forecasts by economists compiled by Bloomberg during the past three months


Renowned US-based business and economics magazine Bloomberg, last week named Uganda the second fastest growing economy in Africa and the fourth globally alongside China in 2020. 

This sharply differs from some other statistics sources, including the Bank of Uganda's. 

So while many economies are contracting or stagnating, what would make Uganda grow at 2.1%, as forecast by Bloomberg? The report on the magazines website put Ethiopia top of the fastest growing African economies at 3.0% globally, the same as Vietnam, while the Bangladesh tops the world at 5% growth. 

Based on IMF data for 194 countries, only 16 countries will grow at 1% or more.

Out of the sixteen richest economies of more than 1 trillion dollars, only China’s economy is projected to grow in 2020.

Bloomberg says African economies will probably have outperformed the rest of the world during the coronavirus pandemic by the end of the year, a view shared by most reports including the World Bank and the International Monetary Fund, IMF.

Africa's 54 countries now include seven of the globe's 10 fastest-growing economies, in part because the lethal virus may have improved their competitive advantage as they accelerated their decade-long transformation from exporters of natural resources to hubs of wireless, remotely engaged commerce. 

“The economies of Ethiopia, Uganda, Ivory Coast, Egypt, Ghana, Rwanda and Kenya withstood the economic impact of the pandemic so successfully that they were among the world’s 10 fastest-growing in 2020," says the report  "At least five of them are expected to remain in that elite growth club through 2022, according to forecasts by economists compiled by Bloomberg during the past three months.”

The Bank of Uganda Director for Research, Adam Mugume last week said Uganda’s economy was poised to contract by 0.3%, meaning it will be slightly smaller than it was at the beginning of the year. 

The BOU attributes this to a decline in general economic activities with some coming to a standstill between March and June, including Tourism which accounts for more than a tenth of the economy. Many sectors have also recorded job losses, some permanently while many businesses remain closed. 

The BOU also says the problems in the export markets will hinder the growth of the economy as exports revenues, workers’ remittances as well as donor inflows remain subdued.

“We used to get FDI of $1.2 billion (Shs4.4 trillion) and the IMF is projecting that this could drop to $500 million (Shs1.8 trillion) in 2020 to 2021,” Dr Mugume said. 

According to the World Bank Uganda Economic Update 2020, only agriculture remained growing while the services sector has been quick to recover. It gives a more optimistic view of the growth prospects, forecasting that the Ugandans economy will expand between 0.4 and 1.7% in 2020. 

This will still be good growth when compared to the rest of the world which is expect to contract by more than 5%, while Sub-Sharan Africa could contract by 2.8%. The Bank is worried that Foreign Direct Investments will fall sharply, affecting the expansion of the private sector. 

Bloomberg attributes its positive outlook for Africa and the top seven in particular, to the good performance of telecommunications, banking and technology corporations, which it says have performed better than in the other markets. 

It says African countries have quickly adopted the idea of remote working which was first embraced by the US, and this is helping the economies recover faster.

But the Bank of Uganda, the African Development Bank and the IMF all say the forecasts they give on Uganda and Africa in general, will also depend on how the countries successfully manage the covid-19 pandemic, and well as how soon a vaccine is discovered and is accessible to the continent.  

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