Uganda’s economy has grown at a slower pace recently, subsequently reducing its impact on poverty. Average annual growth was 4.5% in the five years to 2016, compared to the 7% achieved during the 1990s and early 2000s. The slowdown was mainly driven by adverse weather, unrest in South Sudan, private sector credit constraints, and the poor execution of public projects.
In the latter half of 2017 the economy grew, driven largely by growth in information and communications technology (ICT) services and favorable weather conditions for the agricultural sector. Real gross domestic product (GDP) growth is expected to be above 5% in 2018, and could rise further to 6% in 2019. This outlook assumes continued favorable weather conditions, robust external demand, an increase in foreign direct investment (FDI) inflows as oil exports draw closer, and capital spending executed as planned.
Reliance on rain-fed agriculture remains a downside risk to growth, the income of poor people, as well as export earnings. Tax collections are below expectations and fiscal pressures are rising. Meanwhile, delays and poor management of the public investment program could prevent the productivity gains expected from enhanced infrastructure, while an acceleration in domestic arrears may have an adverse impact on private investment and further limit the extension of credit.
Regional instability and a continued influx of refugees could undermine exports and disrupt growth in refugee hosting parts of Uganda. South Sudan and the Democratic Republic of Congo (DRC) are Uganda’s 2nd and 4th top export destinations. Potentially intensifying conflicts in these countries will negatively affect the growth of Uganda’s exports, which will also have implications for debt sustainability and the current account.
Following the end of the armed conflict in 1986, the National Resistance Movement (NRM) led by President Yoweri Museveni introduced a number of structural reforms and investments, most of which led to a sustained period of high growth and poverty reduction between 1987 and 2010. Similarly, Uganda has introduced ambitious public-sector reforms in the past two decades. This has resulted in the creation of a robust formal governance system and has helped improve public sector management and institutional quality.
Voice and accountability, which improved between 2003 and 2008, have since 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 12, 2018
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