The Uganda economy is set to grow at 4.9% in 2016, according to a report released by the International Monetary Fund, slightly higher than the 4.8% registered in 2015. It also forecasts a real GDP growth of 5.5% in 2017.
Uganda is one of 22 non–resource-intensive economies in sub-Saharan Africa which will benefit from lower oil import prices, an improved business environment, and continuous strong infrastructure investment, according to IMF’s Regional Economic Outlook.
The report says growth in the region is set to slow to its lowest level in 20 years due to low commodity prices and a challenging global economic environment. It predicts real GDP growth of 1.4% this year, which is below population growth rates and contrasts with the high growth rates of the past 15 years. Last year, average GDP growth in the region was 3.4%.
It however points to a recovery next year of 2.9%, but only if action is taken to “address the large macroeconomic imbalances and policy uncertainty in some of the region’s largest economies.”
The report is a tale of two Africa’s and their contrasting fortunes. On one side is 23 commodity exporters – including the continents three largest economies of Nigeria, South Africa, and Angola – which are “under severe economic strains” and responsible for bringing down the average growth rate. On the other end is non-resource-intensive countries like Uganda and Kenya which are expected to perform well in 2016, growing at an average of 5.5%, just below the 6% registered between 2010 and 2014.
It notes that the problems of the commodity exporters have been present since 2014, and arose from the fall in global commodity prices. The decline has led to a “formidable terms-of-trade shock for oil exporters in the region—cutting national income by as much as 15 to 50 percent of GDP since mid-2014—and has also severely affected other commodity exporters, such as the Democratic Republic of Congo, Liberia, and Zambia, and to a lesser extent Niger and Sierra Leone.”
Oil importers too, like the East African countries, have been affected as the decline in commodity prices has led to “tighter global financing conditions.”