The COVID-19 pandemic has already unleased substantial economic damage word-over. Economic growth has been slowed substantially by 2%-3% in Uganda. This is the same world over. The impact on poverty is even greater. We already know that 2.5m people are estimated to have slipped back to poverty due to COVID-19. Employment is also suffering greatly with layoffs affecting lower cadre staff mostly the unskilled.
- GDP, FY 2019/20 was estimated at 138,283 billion in nominal terms, reflecting a 3.1% growth in FY 2019/20, which is lower than 6.8% growth registered in FY 2018/19 and lower than the projected growth rate of 6.0% during the Budget Framework Paper (BFP) preparation time which is adjusted to 2-3%.
- The main driver of the dampening in economic activity is the triple effect of the COVID-19 pandemic, locust invasion and flooding on the economy.
- Agriculture grew by 2%, lower than 5.3% in FY 2018/19. The services sector has grown by 3.6% compared to 5.7% in 2018/19, while growth in the Industry sector is estimated to have slowed to 2.3% from 10.1% in FY2018/19.
- Services sub-sectors are estimated to have grown as follows; trade and repairs (-1.6 percent compared to 4.9 percent in FY 2018/19), transport (-1.5% compared to 2.2% in FY 2018/19), accommodation and food services (-7.0% compared to 3.0% in FY 2018/19)
- Growth in Private Sector Credit (PSC) slowed gradually in FY 2019/20 relative to the growth registered in FY 2018/19. This was due to a drop in business activity, worsening asset quality reflected by a pickup in NPLs (from 4%-10%).
- Export revenues increased by 1.8% to US$3,947.2 million in the year to March 2020 from US$3,877.2 million in the year to March 2019. This was due to higher earnings from the export of gold, coffee, cotton, maize, and cocoa beans; albeit partially moderated by lower earnings from the export of tea, beans, base metals, cement, sugar, soap, and other pulses.
- The lower export earnings are partially attributed to the impact of the closure of the border between Rwanda and Uganda for a large part of the period under review, which resulted in a 95.8 percent (US$190.7 million) decrease in export revenue from Rwanda during the year to March 2020, compared to the same period in the preceding year.
- Imports increased by 3.6% (US$231.9 million) to US$6,690.1 million during the year to March 2020, from US$6,458.3 million in the year to March 2019, largely driven by higher private sector imports.
- The fiscal deficit for FY2019/20 projected at 5% of GDP, 2.6% points higher than the deficit recorded in FY2018/19.
- Estimated increase in poverty from 22% to 30% with 5 million people at risk of unemployment due to COVID 19.
- Still 62% of population trapped in subsistence farming, yet poverty is highest, income inequality gap widens.
- Budget UGX45 trillions Vs. 2-3% GDP growth & 15 Tr. Tax & 9% Interest Payment UGX 4 trillion
Private Sector Foundation Uganda wishes to applaud Government for the response to the COVID 19 pandemic both on the control/prevention and treatment on one part but also on the economic response. Actions done by Government such as deferrals of tax, moratorium on loans, instituting new financing lines at UDB and other response actions have prevented even severe economic damage. One wonders what the current situation would have been, if Government never did anything. It is therefore in order to thank Government.
COVID-19: Investment Opportunities
Although the Covid-19 pandemic presents challenges for the economy, the country has also drawn several lessons and opportunities that inform the Government’s Economic Stimulus and Growth Strategy in implementation of the Budget in the medium term.
- Acceleration of import substitution and export promotion strategy for a range of goods including medicines and other health products;
- Agro-industrialization and light manufactures (based on Uganda’s comparative advantage);
- Adding value to agricultural products and minerals;
- Digitalization of many aspects of socio-economic activity to improve efficiency and reduce costs (e-Commerce; e-Government (including tele-conferencing, procurement and the dispensation of justice); e-Learning; robotic automation, artificial intelligence, cyber security and cloud computing; and digital marketing in tourism – this will entails fast-racking the Fourth Industrial Revolution (4IR);
- Reform of urban transport to reduce congestion, starting with the Greater Kampala Metropolitan Area and eventually Regional Cities;
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