UGANDA

Key conditions andchallenges

Table 1

2023

Population, million

48.6GDP, current US$ billion

42.0

GDP per capita, current US$864.3

International poverty rate ($2.15)

a42.1
a71.8

a91.1

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

a42.7

School enrollment, primary (% gross)b105.5b62.7

Total GHG emissions (mtCO2e)58.9Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2019), 2017 PPPs.
b/ WDI for School enrollment (2017); Life expectancy(2021).

Continued investment momentum, lower
inflation, and improved global supply
conditions have supported a modest acceleration of GDP growth expected at 6.0
percent in FY24. A sustained fiscal consolidation will yield a primary fiscal surplus of 0.2 percent of GDP in FY26 andease pressure on debt. GDP growth will
accelerate beyond 6 percent in
FY25–FY26, if not derailed by a global
slowdown, disruptions to oil production,and weather shocks. Poverty will fall as
incomes recover.

Increased shocks and less momentum behind policy reform create challenges forsustaining economic growth and reducing
poverty in Uganda. Rapid population
growth has kept a large share of the population below the poverty line, while humancapital and infrastructure deficits have
limited the country’s growth potential andsocial welfare improvement. The challengeof creating productive jobs for the almost
one million working age Ugandans entering the labor market every year is enormous. Although services constitute a large
share of GDP, it has created a few jobs,
mainly informal and low-skilled. Most ofthe jobs are in the agriculture sector which
is prone to natural disasters that climatechange is making more frequent and severe—and adapting to which is hampered
by low adaptive capacity.
To promote economic growth and reducepoverty over the medium term, the Ugandan economy needs to structurally transform and shift labor into a more productive employment, ahead of oil revenue
flows. The first required reform is to shift
investments towards the private sector by
reducing the cost of doing business andfostering access to finance. Second, thegovernment must invest more strongly inhuman capital by shifting spending intosocial sectors, alongside measures to reduce inequality and strengthen resilience,and promoting uptake of digital and other

FIGURE 1 Uganda / Fiscal adjustment

Percent of GDP
20

innovative technologies. Finally, is tomaintain prudent macroeconomic management alongside structural policies toavoid the ‘Dutch’ disease and to build resilience to climate shocks.

Recent developments
Economic growth accelerated slightly to an
estimated 6.0 percent in FY24 despite external shocks. The Uganda Bureau of Statisticsestimates that GDP grew by 5.3 percent during the first quarter of FY24. The industrial
sector grew by 11.9 percent during this period, thanks to an oil-related construction
boom as FDI grew over 56 percent. Agriculture, too, accelerated despite volatile weather conditions. An uptick in private investments and employment growth reinforced
domestic demand deeper into the year - despite a slight reduction in February 2024 to51.7, Uganda’s Purchasing Managers’ Index
has for the sixteenth consecutive month signaled a strengthening of private sector activity, with sustained increases in output, neworders, and employment. While Uganda’s
exports surged with increased volumes of
production and improvement in terms oftrade, resumption of gold trade, and recovery of tourism, imports grew stronger, supported by demand from oil investments.
The Bank of Uganda (BoU) tightenedmonetary policy in March 2024 to curb
possible passthrough of a fast-depreciating shilling. Low inflation, averaging 2.9
percent during the first half of FY24 benefitted both investments and the poorhouseholds. During the second half of

FIGURE 2 Uganda / Actual and projected poverty rates andreal private consumption per capita
Poverty rate (%)

Percent of GDP
60

1540530020-5

10

2.590

50

10

Real priv cons per capita (constant mil. LCU)

100
80

2.0

70
60

1.5

50
40

1.0

30
200.5

10-100
2019

2020

2021

2022

Public debt (rhs)
Domestic revenue (lhs)2023

02024e 2025f 2026f

0.0
2009 2011 2013 2015 2017 2019 2021 2023 2025

Primary balance (lhs)

Source: Ministry of Finance, Planning and Economic Development.

International poverty rate

Lower middle-income pov. rate

Upper middle-income pov. rate

Real priv. cons. pc

Source: World Bank. Notes: see Table 2.

MPO

1

Apr 24

FY24, inflation increased – gradually to 3.4
percent in February 2024, but forecast toaccelerate towards the target of 5 percent
as the Ugandan currency depreciated due
to intensified portfolio outflows. Hence, onMarch 6, 2024, BoU raised its policy rate
to 10 percent, from the 9.5 percent maintained since August 2023.
The fiscal consolidation has steadily reduced the primary fiscal deficit, estimated at
0.6 percent of GDP in FY24. While challenged by persistent shortfalls, estimated atabout 12 percent below plans during the seven months to January, government revenues
share in GDP continued to increase. The
shortfall has been partially offset by underspending due to cuts and delays in the development projects, which may have implications to growth. The fiscal deficit was mainly
financed through external borrowing.
Consistent with accelerated economic
growth and low inflation, household perceptions on current and future economic
wellbeing are positive. According to the October/November 2023 phone survey, respondents also experienced improved access to essential products. Nevertheless,about 41 percent of households continued
to be moderately food insecure and four
percent were severe food insecure. About
40 percent respondents were certain toexperience extreme weather events during
next 12 months with higher negative expectations among respondents from thepoorest Northern and Eastern regions.

OutlookReal GDP growth is expected to accelerate
to 6.6 percent by FY26, mainly driven byinvestments in the oil sector. With the progressed preparation of the Tilenga andKingfisher drilling project areas, supportive infrastructure (including Kabaale airport), and the pipeline construction, oil exports are expected to commence by end of2025. However, timing may slip if the 60
percent of the pipeline financing, anticipated from external creditors, delays. The investments and exports of oil will support
government’s other promotion efforts fortourism, export diversification, and agroindustrialization. Lower inflation will enable BOU to ease its stance, which combined with reduced fiscal pressures undera fiscal consolidation, augurs well for bothforeign
anddomesticinvestment.
Nonetheless, the slowdown of global
growth and disruptions in global financial
conditions remain major downward risks.

TABLE 2 Uganda / Macro poverty outlook indicators

The primary fiscal balance is expected toevolve into a surplus of 0.2 percent of GDP
by FY26, through more efficient spending
and implementation of the Domestic Revenue Mobilization Strategy. This fiscal consolidation aims to continue reducing nonpriority capital expenditures while maintaining the share of social spending, crucial
especially to poor households. Rationalization of exemptions and revenue administration modernization to improve compliance are expected to yield revenues of approximately 0.5 percent of GDP in FY25.
The reduction in the fiscal deficit will modestly reduce debt below 50 percent of GDP
through 2026, keep debt service manageable, and reduce crowding out of private
sector investment.
Accelerated growth may reduce poverty(measured at the $2.15/day international
poverty line) from 41.3 percent in 2024 to
40.1 percent by 2026. But given that households have limited adaptive capacity, thepace of poverty reduction will ultimately
depend on how food access and affordability evolve, and on the incidence of weather
and any environmental shocks. The trickle-down effect of oil for the poor will depend on adopting the right set of policies
and strengthening existing and setting up
new institutions.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
3.4
4.2
6.1
5.1
2.6
8.6

2022
4.7
3.4
-17.4
20.1
-18.6
-8.9

2023e
5.2
4.4
18.3
1.8
7.0
3.2

2024f
6.0
5.4
2.0
9.5
7.7
8.6

2025f
6.2
5.8
-3.7
10.6
8.3
8.7

2026f
6.6
5.6
5.3
9.9
8.4
8.8

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

3.4
3.8
3.4
3.3

4.7
4.4
5.4
4.4

5.2
4.8
3.8
6.2

6.0
4.9
6.2
6.4

6.2
5.0
6.5
6.6

6.6
5.1
6.5
7.4

Inflation (consumer price index)

2.5

3.7

8.8

3.1

4.5

5.0

Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)

-10.2
2.1

-7.9
3.1

-8.2
5.9

-8.1
8.7

-7.4
10.9

-6.9
9.9

Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)
Primary balance (% of GDP)

-9.5
14.7
49.6
-6.8

-7.4
14.2
50.7
-4.6

-5.5
14.4
49.1
-2.3

-3.9
15.8
48.5
-0.6

-3.7
16.1
47.8
-0.3

-3.1
17.7
41.9
0.2

42.2
71.7
90.9

42.1
71.8
91.0

41.8
72.0
91.5

41.3
72.4
92.3

40.7
72.8
93.2

40.1
73.2
94.1

3.215.5

3.1
16.2

3.2
17.2

3.4
18.1

3.4
18.9

3.6
19.7

a,b

International poverty rate ($2.15 in 2017 PPP)a,b
Lower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2016-UNHS and 2019-UNHS. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026.
b/ Projection using point-to-point elasticity (2016-2019) with pass-through = 0.7 based on private consumption per capita in constant LCU.

MPO2Apr 24