Businesses Stay Optimistic Despite Credit Strain and Year-End Softening – Bank of Uganda Survey Taken together, the numbers suggest an economy that still believes in its own momentum, but is carefully rationing risk. Businesses are planning, ordering and looking ahead — yet holding back on investment and hiring until financing conditions improve. How quickly optimism turns into expansion will depend less on sentiment, and more on whether credit becomes cheaper and easier to access in the months ahead.

Ugandan businesses maintained a broadly optimistic outlook through 2025, supported by steady order flows and firm expectations for the near term, even as credit conditions tightened and confidence eased toward the end of the year.

The overall business confidence index averaged 58.3, remaining comfortably above the 50-point optimism threshold. Sentiment climbed to 59.5 in May, then slipped through the final quarter, reaching 56.2 in November before edging up to 57.2 in December.

Future expectations outpace present conditions

Businesses reported modestly positive operating conditions, generally in the mid-50s, while expectations for the next three months consistently remained stronger. Forward-looking confidence peaked at 63.2 in August, underscoring continued planning for expansion despite pockets of uncertainty.

Order pipelines reinforced the outlook. Supplier orders averaged 62.5 during the year, hitting 64.9 in June, pointing to sustained production and restocking activity.

Hiring improves slowly, but remains cautious

Employment lagged broader sentiment. The employment index opened the year at 47.0, signaling contraction, but gradually improved, rising above the 50-point mark mid-year and closing at 50.8 in December.

Hiring plans were firmer than current employment trends. Expected employment climbed to 55.4 in August and ended at 53.1, suggesting that employers are preparing to expand headcount once conditions stabilize.

Tight credit remains the biggest constraint

Access to credit remained the weakest indicator across the year. The index started at 30.9, improved gradually, and reached 45.3 in October – still below neutral – before closing the year at 43.2.

Persistently high borrowing costs, stricter loan screening and slower approvals continued to weigh on working-capital needs and investment intentions, particularly in capital-intensive sectors.

Clear sector winners and latecomers emerge

• Financial services remained the standout performer, climbing as high as 81.4 in October and averaging well above 70 across the year.
• Other services held steady around 60, reflecting resilient demand.
• Manufacturing showed consistent strength, supported by healthy order books and reaching 61.9 in September.
• Construction experienced pronounced swings, dipping to 47.0 in August as project timelines and financing pressures intensified.
• Agriculture fluctuated sharply, rising to 63.4 in March and falling to 46.7 in November, reflecting seasonal weather, cost and price cycles.

Competition remained intense, with readings typically between 66 and 68, while stocks of finished goods stayed relatively lean, a sign of cost discipline and cautious demand expectations.

Outlook: Growth with caution

The emerging picture is one of measured optimism. Businesses expect activity to continue improving, anchored by steady orders and gradually strengthening employment plans. But tight credit conditions, margin pressure and year-end uncertainty continue to temper expansion.

For now, momentum is forward-moving- but deliberate, disciplined, and closely tied to the cost of financing