Uganda’s economy has experienced a slowdown in growth due to the severe impact of the COVID-19 (coronavirus) pandemic crisis, a locust invasion and flooding caused by heavy rains. Uganda’s real gross domestic product (GDP) in 2020 is projected to be between 0.4 and 1.7% compared to 5.6% in 2019. Exports, tourism, remittances, foreign direct investment and portfolio flows shrunk during the second half of FY20 due to international trade disruptions and restrictions of movement of people. This has created significant fiscal and external imbalance, and a deceleration in growth in services, primarily in real estate activities and information and communications technology.
The medium-term outlook is also not favorable for Uganda. The decline in Uganda’s real GDP growth and corresponding loss of jobs could be even larger if the country were to face a more widespread pandemic and further locust invasions, as this could deter a rapid economic recovery. Heightened uncertainty around the upcoming February 2021 elections further exacerbate these risks.
While about 700,000 young people reach working age every year in Uganda, only 75,000 jobs are created each year. This leaves more than 70% of Ugandans employed in agriculture, mainly on a subsistence basis. An average of one million young people are expected to reach working age between 2030-2040.
Finally, regional instability, pandemic preparedness (Ebola and coronavirus) and broader global trade uncertainty could undermine exports and affect growth and have implications for debt sustainability and the current account.
Uganda has achieved remarkable results in reducing poverty over the past decades, mainly driven by the agriculture sector. From 1992 to 2013, the percentage of Ugandan households living in poverty was halved, but vulnerability to external shocks remains high; for every three Ugandans who get out of poverty, two fall back in.
All Uganda’s regions registered an increase in the number of poor people with the notable exception of the Northern region, which is the poorest, and where poverty decreased from 44% to 33%. COVID19 has worsened the effects of poverty and up to three million people could fall into poverty particularly in urban areas, above the estimated 8.7 million in FY17. Current social protection programs are inadequate, reaching just 3% of the population and increasing overall vulnerability to shocks.
Human Capital in Uganda
Uganda’s Human Capital Index (HCI) is low; a child born in Uganda today is expected to be 38% as productive when she grows up, as she could be if she enjoyed complete education and full health. A child in Uganda completes seven years of education by age 18, compared to 8.1 for their regional counterparts. However, actual years of learning are 4.5, with the 2.5 years considered ‘wasted’ due to poor quality of education. For instance, only 6% of children in Uganda can read a paragraph at the end of the fourth grade.
Undernutrition is high and stunting affects one-third of all children in Uganda aged five years and below. At 3%, Uganda’s annual population growth rate is among the highest in the world, despite a reduction in fertility rates. Uganda’s population of 35 million is expected to reach 100 million by 2050, while the annual urban growth rate of 5.2% is among the highest in the world and is expected to grow from 6.4 million (2014) to 22 million by 2040.
Uganda’s refugee population has almost tripled since July 2016 and is currently around 1.4 million, making it the largest refugee host in Africa, and third largest in the world. While its open-door refugee policy is one of the most progressive in the world with refugees enjoying access to social services, land and can move and work freely, the continued influx is straining host communities and service delivery.
Last Updated: Aug 12, 2020