Uganda’s 2024 economic prospects brighter, on the back of oil and tourism, the World Bank says

The World Bank has, in its latest forecast, painted Uganda’s economic prospects for 2024 as much brighter compared to her neighbours in the Sub-Saharan Africa region.

The World Bank published its ‘Global Economic Prospects Report’ on 8th January showing Uganda’s growth is projected to strengthen between 5.4 percent in 2024 and 5.7 percent in 2025 largely backed by oil investments.

This is slightly below the Bank of Uganda’s projections at 6 per cent for the Financial Year 2023/24 supported by the continued recovery of industry, agriculture, construction, services and continued foreign direct investments.

The World Bank shows a similar pattern of economic growth is expected in Kenya and Tanzania supported by other factors.

“Uganda will also benefit from infrastructure investment ahead of new oil production in 2025, and investment in Kenya should be boosted by increased credit to the private sector as the government reduces domestic borrowing,” the World Bank report reads in part while indicating that reforms will improve the business climate in Tanzania and are expected to lift growth.

The deep dive into economic forecasts in non-fragile low-income countries such as Uganda shows growth is also expected to pick up as monetary policy eases amid waning inflation, and investments into tourism, export diversification, and agro- agro-industrialisation.

Increasing investment is expected to drive growth in Kenya and Uganda, partly owing to improved business confidence.  

Uganda was earmarked among the top 10 African countries as a key tourism destination expected to have large inbound travel receipts and leisure spending in 2024 ranking against heavyweights such as Egypt and South Africa, according to the WTM Global Tourism Report published in November last year.

It is also envisaged that the construction of the East African Crude Oil Pipeline will drive much of the oil-related investments.

Data from the Petroleum Authority of Uganda shows the total investment made directly in the sector in 2022, the first year after FID was USD 1.2 billion and it is projected to double to USD 2.7 billion in 2024.

Risks to economic growth

However, the World Bank warns that downside risks might emerge affecting the projected growth.

The Bank points out that a rise in political instability and violence, such as an escalation of the conflict in the Middle East could accelerate the situation in Sub-Saharan Africa in terms of food insecurity.

A conflict-induced sustained oil price spike would not only raise food prices by increasing production and transportation costs but could also disrupt supply chains, leading to less affordable food and an uptick in malnutrition rates in the region.  

Although global food and energy prices have retreated from their peaks in 2022, disruptions to global or local trade and production could reignite consumer price inflation, especially food price inflation, throughout the region.

Such disruptions, especially in mining and agriculture, could be triggered by extreme weather events linked partly to climate change.

The region remains highly vulnerable to such events.

For instance, the current El Niño weather pattern could bring above-average rainfall and flooding to East Africa, and drought to Southern Africa.

Global growth could also weaken more than expected, perhaps owing to tighter financing conditions or further deterioration in China’s growth.

In such a scenario, the prices of many of Sub-Saharan Africa’s export commodities, especially metals and minerals, could weaken.

Public debt service costs have also risen sharply in many Sub-Saharan African economies since the pandemic.

This has increased the need for debt reduction, particularly in highly indebted countries.

If global or domestic inflation turns out to be higher than expected, interest rates could remain elevated for a longer duration than assumed in the baseline scenario, leading to tighter financial conditions globally and in the region.

This could limit access to financial markets and increase risks of financial distress and government debt defaults.