Uganda’s economy rebounded in final three months of 2016

It is the second time in a decade that quarterly GDP growth over four quarters does not exceed 1.0%

Uganda’s economy recorded positive growth in the second quarter of 2016/17 after contracting in the previous quarter, data released by the Uganda Bureau of Statistics on Tuesday show.

Real GDP growth was 0.8% in the three months ending December, up from a decline of 0.1% (revised from 0.2%) in the first quarter of the current financial year. An expansion in the services sector – which accounts for just over half of GDP at 52.1% – and taxes on products drove growth.

The services sector grew by 2.1% during the period compared to a decline of -0.1% in the previous period. “The main driver to this growth was information and communication and public administration activities,” UBOS said.

Value added in the financial and insurance sub-sector declined for the third consecutive quarter, however, falling 2.3%. The cause was reduced activity for commercial banks, with interest and non-interest expenses increasing much faster than incomes according to UBOS.

Value added in the agriculture, forestry, and fishing sector also declined – the fourth back-to-back decline. Growth fell by 2.2%, after a decline of 0.6% (revised) in the previous sector.

UBOS said the decline was due to a fall in food crops and cash crops activities. Food crops declined by 4.8% while cash crops fell 4.2%. Food crops were the second biggest contributor to GDP with 10.3% after trade and repairs – which fall under the services sector – whose total share was 11.1%.

Recent drought conditions in parts of the country prompted economists to adjust growth projections for the current financial year. Last November, the finance minister said growth will be lower than the expected 5% because of the “impact of adverse weather conditions on agricultural production,” among other factors.

Bank of Uganda also downgraded its growth projection for this year from 5.0% to 4.5%, citing weaker-than-expected growth in the first half of the year due to the drought.

Value added in the industry sector declined by 0.7% in the second quarter versus a 1.4% increase in the first quarter. This was largely due to a decline in manufacturing (2.8%) and mining and quarrying (11.9%), although construction activities were up 3.5%.

The fall in manufacturing, according to the statistics bureau, was due to a “decline in production in sugar and coffee processing industries attributed to drought.”

Taxes on products and subsidies – whose share of GDP was 8.6% – increased by 3.8% to Shs1,221 billion compared to Shs1,176bn in the first quarter. This was mainly due to an increase in the volume of exports, according to UBOS.

Despite the rebound, growth in the past four quarters is among the weakest in the ten years for which data is available. It is the second time in a decade that quarterly GDP growth over four quarters does not exceed 1.0%.

The first was in the 2011/12 financial year, during which the economy was in recession for the final two quarters.

Related: Uganda’s GDP contracts 0.2% in Q1 of 2016/17