Uganda’s economy grew at an annual rate of 3.9% in the 2016/2017 financial year, the slowest rate in four years, with growth in all three main sectors slowing down compared to the previous year.
Growth in 2016, the calendar year, was the slowest on record, coming in at 2.3%, data released Wednesday by the Uganda Bureau of Statistics show. It is the slowest rate since 2012 when GDP growth was 3.2%.
The growth figures are preliminary estimates and cover the period to March 2017. Figures for April to June 2017 were “derived from a number of assumptions and flash estimates from a few economic activities,” the statistics bureau said. The financial year runs to the end of June.
Growth in the agriculture, forestry and fishing sector is estimated at 1.3% from 2.8% in 2015/16, while industry expanded by 3.4% and services at 5.1% compared to 4.7% and 5.9%, respectively, in the previous year.
“The main drivers of growth were fishing activities for agriculture sector,” Ubos said, “information and communication activities for services sector, and construction activities for industry sector.”
This year’s GDP growth rate, adjusted for inflation, is the slowest since 2012/13 when the economy expanded by 3.6%. GDP growth in 2015/16 was 4.7%.
However, the lower figure is in line with expectations. Since last year, the country has experienced drought conditions and lower output in the agricultural sector. Credit growth to the private sector also fell to historical lows in 2016 due to less appetite for risk in the banking sector and higher provisions for bad loans. These trends led to warnings from observers that growth would slow in the current year.
The ministry of finance, Bank of Uganda, International Monetary Fund, and the World Bank all revised their growth estimates downwards. The most recent downward revision was by the IMF, which said the economy would grow at between between 3.5% and 4% in 2016/17, down from an earlier projection of 5%.
But despite the problems faced by the agriculture sector, its contribution to GDP in the financial year rose to 25.0% from 23.7% in 2015/16 “due to high price increases of food crops”. Food crops growing activities increased by 1.4% compared to 1.3% in the previous year – mainly due to farming activities like field preparations – while their contribution to GDP increased to 13.6% from 12.1%.
The value added by cash crops growing activities however fell 0.4% compared to a growth of 7.9% in 2015/16, while contribution to GDP was 1.8% from 1.7% the previous year. Coffee, cotton, and flowers posted an increase in value added, while declines were registered for tea, cocoa, vanilla, tobacco, sugar cane, and palm.
Other sub-sectors in agriculture – livestock, fishing, and forestry – all expanded at a slower rate compared to the previous year. Livestock activities are estimated to have grown by 1.6% versus 2.8% in 2015/16, forestry activities by 1.2% compared to 4.7%, while fishing activities expanded by 2.2% compared to the 4.8% growth in the previous year.
Growth in the industry sector was 3.4%, slower than the 4.7% recorded in 2015/16. Ubos attributes this to “the weaker performance of mining and quarrying and construction activities when compared to previous year”; mining and quarrying activities contracted by 4.5% from an 11.4% growth in the previous financial year, while construction activities came in at 5.2% versus 7.9% in 2015/16.
Industry’s contribution to total GDP declined to 19.6% from the 20.7% recorded in 2015/16.
Services, the biggest sector with a 47.4% share of total GDP compared to 47.6% in 2015/16, expanded by 5.1% which is slower than the 5.9% growth in the previous year. Trade and repairs activities grew by 0.9% versus 3.6% in 2015/16; the sub-sector is the second biggest component of the economy with an 11.9% share after food crops.
Financial services activities contracted by 1.8%, compared to the growth of 5.8% recorded in 2015/16, only the second contraction after the one recorded in 2011/12 when the sector shrank by 1.0%. However, as the statistics bureau notes, “during both periods, financial institutions such as commercial banks registered high profits owing to the high prices charged for credit and other bank facilities.”
Ubos said the GDP estimates will be updated and revised in the first week of October when “actual and more comprehensive data becomes available”.