Experts point at both domestic and external factors which include the failure by Uganda’s trade partners mainly in Europe, to stabilize their economies. But some of the countries, which are the main markets for Uganda’s exports have re-introduced lockdowns for the third time as new cases of the disease rise again.
The growth of Uganda’s economy in the short term is threatened by the effects of the COVID-19 pandemic, the hovering threat of the
desert locusts in the region, as well as uncertain weather conditions.
The Bank of Uganda expects the economy to grow by at least
3 per cent in 2021, 6 per cent in 2022 and thereafter, it could grow by up to 10 per cent per year. These growth forecasts are based on the Final
Investment Decisions on the oil and gas sector which are expected this month,
the successful rollout of the COVID-19 vaccines and the revival
in the global tourist activities.
Experts, however, point at both domestic and external
factors which include the failure by Uganda’s trade partners mainly in Europe,
to stabilize their economies. But some of the countries, which are the main markets for Uganda’s
exports have re-introduced lockdowns for the third time as new cases of the
disease rise again.
This means reduced demand for commodities, disruptions in cargo
transport and the inability of people to move out of countries, which is stifling the growth
of tourism. The middle east has recently become a major export
destination and in January, it accounted for half of Uganda’s export earnings,
followed by the East African Community with a fifth of the earnings, according
to the Bank of Uganda statistics. The European Union followed with 12.2 per cent.
Anne Juuko, the Chief Executive Officer of Stanbic Bank
Uganda says that the two most important issues will be how Uganda manages to avoid a second wave of the pandemic and if the Final Investment Decision is made.
//Cue in; this growth….
Cue out…. a sort of mixed view.”//
Foreign investments, the main source of growth in the year before
2020, were heavily affected by the pandemic, as investors abruptly withdrew
and left the country. This came when the country was still battling the effects of
heavy rains like floods and rising lake water levels, as well as the threat of
the desert locusts to the agriculture sector.
While the swarms were reported in 24 districts, there was
not much effect on agricultural production.
However, earlier this month, experts from the desert locust
control organization of East Africa together with the Food and Agricultural
Organization (FAO) warned of a possible invasion of the locusts.
They warned that there are several swarms heading towards
Uganda from Kenya, prompting Uganda to go on alert. Juuko says the threat remains for as long as the locusts
are still in neighbouring countries.
//Cue in; For decades…
Cue out…. investors leaving.”//
The threats to the economy will also mean suppressed
employment persisting as indicators still show that more companies are laying
off workers and this will further affect growth. This is resulting from the slow recovery of economic
activities, with some companies restructuring which others either closed or
reduced their activities.
The financial sector however expressed relief that the climax of the election period, which had also been listed as a threat to the
economy, passed without much impact. Inflation remained within the targeted levels of 3 to 5 per cent,
while the foreign exchange market also remained largely stable.
Juuko attributes this to the monetary policies at the Bank
of Uganda, saying that the regulator did their best amidst local and global
economic uncertainties. However, she says they will be watching how the government
manages its budget especially as the Uganda Revenue Authority is already reporting
collection deficits in trillions of shillings.