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Optimism as national economy registers 6.6% growth

Peter 16th Oct, 2024 Economy Pedson Mumbere
Optimism as national economy registers 6.6% growth

A workers in a sugar factory. Export receipts are contributing to the reduction in the trade deficit. FILE PHOTO


Optimism as national economy registers 6.6% growth

Uganda’s economy grew by 6.6% during the second quarter of 2024, signalling a robust recovery and expansion. High-frequency indicators of economic activity and positive business sentiments suggest a continuing upward trajectory.

The Composite Index of Economic Activity (CIEA) registered growth, rising to 166.63 in August 2024 from 166.03 in July. This upward movement indicates enhanced economic performance across various sectors. Furthermore, both the Purchasing Managers Index (PMI) and the Business Tendency Index (BTI) were recorded at 54.2 and 57.8 respectively in September 2024.

  • “These figures are above the threshold of 50, suggesting that the health of businesses and sentiments in the private sector are positive,” said Ramathan Ggoobi, the Permanent Secretary and Secretary to the Treasury at the Finance Ministry.

Julius Mukunda, CEO of the Civil Society Budget Advocacy Group (CSBAG), emphasized the significance of these growth figures.

“While the growth rate is encouraging, it is crucial that the benefits reach ordinary Ugandans through job creation and improved public services,” Mukunda remarked. He urged the government to ensure that the economic growth translates into tangible improvements in living standards for all citizens.

  • The government’s strategic investments, particularly in the Accelerated Transformation and Modernization Strategy (ATMS), aim to bolster the economy ten-fold, according to Ggoobi, which he says anticipates economic growth between 6% and 6.5% for the current financial year, with even higher projections in subsequent years driven by ongoing initiatives under the ten-fold Growth Strategy.

Uganda’s merchandise trade deficit narrowed to USD314.1 million in August 2024, down from USD 342.8 million in the same month the previous year. This reduction can be attributed to a significant increase in export receipts that outweighed the rising import bill. Total exports in August 2024 reached USD 789.58 million, reflecting a substantial growth of 17.9% compared to USD 669.69 million in August 2023.

Coffee remains a cornerstone of Uganda’s export economy, with its export value surging by 82.2% from USD121.64 million in August 2023 to USD 221.63 million in August 2024. Such growth highlights the continued global demand for Ugandan coffee, further strengthening the agricultural sector.

Foreign Direct Investment (FDI) inflows for the fiscal year 2023/24 hit a record high of USD3,034.11 million, up from USD2,950.60 million in FY 2022/23. This increase is a testament to the growing investor confidence in Uganda, largely driven by activities in the oil and gas sector as the nation gears up for its first oil production in FY 2025/26.

Ggoobi emphasized the importance of this sector in attracting investment saying the preparations for oil production are crucial for economic expansion and job creation. Regarding inflation, Ggoobi reported that Uganda’s annual headline inflation remains subdued, declining to 3.0% for the year ending September 2024.

  • This stable inflation rate supports consumer purchasing power and fosters an environment conducive to investment.
  • The current growth trajectory has several implications for Uganda’s economy. It suggests enhanced business confidence, which can lead to increased private sector investment and consumer spending.

“This growth could mean more job opportunities and higher incomes for Ugandans,” Mukunda noted. Furthermore, the narrowing trade deficit indicates a healthier balance of payments, which is essential for long-term economic stability.

Uganda’s economic growth of 6.6% in the second quarter of 2024 underscores a positive outlook, backed by strategic government initiatives, increased exports, and rising foreign investment.

Ggoobi’s insights into these trends reflect a government poised to capitalize on opportunities for development and prosperity, with economists like Mukunda advocating for inclusive growth that benefits all Ugandans.

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