African Union launches s 

Monday, February 03, 2014 

Economists predict strong growth

Nicholas Malaki (R) a senior investment manager at Pine Bridge Investments addressing the press during the meeting in Kampala last week (Photo by Emma Onyango)

KAMPALA, UGANDA - Uganda has opened the year 2014 from a strong economic position with inflationary pressures subdued, underpinned by stable energy prices, moderation in food inflation, a stable exchange rate and supportive monetary policy platform.

In fact, economists have even predicted that the economy could grow by 6.5% in the FY2013/14 given the positive economic outlook. They base their projections on increased public spending especially on infrastructure and credit expansion.

One of the key driving factors in Uganda’s economic resurgence according to pundits has been the stability of the currency. The shilling appreciated by about 6% over the last year.

“Uganda’s overall macroeconomic conditions are favourable, growth is picking up, inflation remains low, the fiscal deficit remains manageable and the exchange rate is stable. That said, we still feel that the country has continued to perform below its potential and is capable of exceeding the 7% GDP threshold,” says Denis Mugalya, an Investment Manager at Pine Bridge Investments, an asset management firm. 

Mugalya however believes that the Uganda shilling is expected to reverse some gains as import demand increases. 

“Looking forward, the shilling outlook is a story of two halves with the shilling expected to remain strong during the first half of 2014 and weaken against the hard currencies in the second half of the year,” said. 

Economic commentators also point to recent developments saying that these could scupper growth prospects, especially the South Sudan conflict given that it is Uganda’s largest trading partner.

The question begs, what the impact of the turmoil in South Sudan on Uganda in economic terms will be given that Sudan’s contribution has grown in leaps and bounds and is now a major source of foreign exchange and a major destination of food and manufactured products from Uganda.

Statistics from Uganda Bureau of Statistics show that of all Uganda’s exports to the COMESA region in the FY2012/13, 27% or $346.82m was to South Sudan followed by Kenya 21% ($268.56m), DR Congo 20% ($255m) then Rwanda 17% ($217.24m). 

Mugalya also noted that much as inflation remained relatively stable in 2013, inflation tame could rise marginally in the second half of 2014 to between 8-10%.

“Inflation in 2013 remained modest underpinned by relatively stable energy prices and moderation in food inflation. Looking forward, we expect inflation to rise in the second half of 2014 driven by base effects while food prices largely depend on weather.”

He was addressing the press while releasing the Quarter 4 2013 Investment Brief at the Kampala Serena Hotel last week.

By Emma Onyango, Monday, February 03rd, 2014