3 MAIN REASONS FOR UGANDA’S LOWER GROWTH ECONOMY GROWTH

3 MAIN REASONS FOR UGANDA’S LOWER GROWTH ECONOMY GROWTH

By Tukundane Yonna

Uganda’s economy is said to have remained resilient a midst a volatile global environment. Total national economic output is estimated to have expanded by 4.6% in the financial year ending, supported by robust growth in the services and construction activities.

Although this is lower than the growth target of 5.0%, it is significantly higher than the projected growth for sub-Saharan Africa of 3% projected the same period. Lower growth of the economy arose from three main factors:

  1. The sharp fall in international commodity prices such as coffee, tea, minerals, which form the bulk of Uganda’s exports. For example, Tea prices have dropped from US Dollar cents 403.03 per Kg in July 2015 to US Dollar cents 237.99 per Kg in April 2016; and Copper from US$ 5,456.75 per tonne to US$ 4,872.74 per tonne. The shift to Services in China’s economy, has also contributed to the fall in global demand for minerals and other commodities;
  2. The decline in private sector credit growth as a result of high interest rates, which have constrained domestic activity; and
  3. The strengthening of the US Dollar as a result of the recovery in the US economy which led to depreciation of our shilling. This caused domestic inflation. The strong Dollar also made imports more expensive, constraining business cash flows.

Hon Matia Kasaija says despite these challenges, Services continued to grow strongly rising by 6.6% from 4.5% last financial year during the 2016/17 budget reading at Serena Conference hall yesterday.

Agriculture, which is the back-bone of Uganda’s economy, expanded by 3.2% in real terms compared to a growth rate of 2.3% the previous year. Meanwhile Industry grew by 3.0% which is lower than the 7.8% recorded a year before.

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