As 2023 comes to a close, economic indicators show that Uganda is on the right trajectory.
According to the monetary policy statement for December, Bank of Uganda maintained the Central Bank Rate (CBR) at 9.5 per cent, a reflection that inflation continues to be moderate.
“The decision to leave the CBR unchanged reflects the MPC’s assessment of the inflation outlook in the light of incoming economic data. The medium-term inflation forecast for December 2023 shows that the inflation outlook remains unchanged from the October 2023 forecast,” the bank said.
The bank notes that inflation is projected to remain below 5 per cent in the near term and return to target in the medium term.
Yet this inflation outlook is subject to heightened risks.
On the upside, the bank notes, the current geopolitical conflicts could escalate, leading to higher international oil prices being passed through to domestic pump prices and renewed supply chain disruptions.
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On the downside, the central bank says the current rains could result in bumper harvests, further depressing food crop prices.
As we head into 2024, the economy could also receive a boost from the ongoing investment activity in the oil and gas sector, higher regional demand for exports on the back of expected higher growth in most sub-Saharan African countries, resilient remittances, and tourism inflows.
Whatever the case, the bank cautions that the growth outlook is subject to uncertainties, including slower-than-expected global and regional growth; a resurgence of supply chain disruptions if geopolitical tensions escalate; tighter fiscal policy, partly due to adverse global financial markets, which could constrain government development spending; and tighter credit conditions, which could limit household consumption and private sector investment.