Uganda’s economy has grown at a slower pace recently thus reducing its impact on poverty. Average annual growth was 4.5% in the five years to FY16, compared to the 7% achieved during the 1990s and early 2000s. The economy has since faced headwinds, including adverse weather, the civil unrest in South Sudan, global economic uncertainties, and private sector credit constraints.
As the economy becomes more resilient and election-related uncertainties recede, the economy is expected to grow at 4%–5% during FY17 as the impact of the drought recedes, distress from the banking system distress is contained, and the execution of the public projects improves. This rate of growth is expected to accelerate to about 5.1% in FY18, and average 5.6% in FY19. In the short term, large public sector infrastructure projects will continue to be the main driver of economic activity, partly on account of the accelerated development and construction of oil-related infrastructure.
The country’s economic growth faces a number of risks: delayed completion of the massive public infrastructure program; regional instability; global uncertainty; and credit market constraints. The weather- and climate-related changes are also a source of vulnerability for agriculture, and a further slow-down in the Chinese economy could adversely impact Uganda’s investments in infrastructure. The risk of debt distress remains low with the present value of public debt at 36% of GDP.
Following the end of the armed conflict in 1986, the ruling National Resistance Movement (NRM) led by President Yoweri Museveni introduced a number of structural reforms and investments, which led to a sustained period of high growth and poverty reduction between 1987 and 2010. With ambitious public sector reforms introduced in the past two decades, the last three years have seen an improvement in government effectiveness. But voice and accountability, which improved between 2003 and 2008, have declined. Policy and legal frameworks continue to improve, notably through the Public Financial Management Act (2015), although gaps in implementation in procurement and anti-corruption remain.
Last Updated: Apr 20, 2017