Uganda’s economy posted its slowest growth since early 2017 in the three months to the end of June as the trade and repairs sub-sector contracted while expansion in manufacturing and education cooled down.
Gross domestic product increased by 5.0% from a year earlier in the fourth quarter of the financial year that ended in June, according to seasonally adjusted estimates from the Uganda Bureau of Statistics. That was below the previous period’s 5.8% growth (revised). It was also the third successive quarter GDP expansion was lower than in the preceding period.
The trade and repairs sub-sector, part of the services sector, contracted 1.4% compared to growth of 2.2% in the first three months of this year. Manufacturing and education, classified under industry and services respectively, expanded 0.4% and 1.4% respectively, down from 2.3% and 9.0% in the previous quarter.
Trade and repairs share of total GDP was 10.4% while that of manufacturing was 7.1%. Activities in the education sub-sector contributed 5.7% to GDP.
The economy’s expansion in the quarter was driven by growth in information and communication activities, construction activities, real estate activities, and mining and quarrying. Information and communication activities expanded by 16.1% year-on-year, while construction and real estate activities rose 10.9% and 6.3% respectively. Value added in mining and quarrying was up by 19.5%.
However, real estate activities grew at a slightly slower pace than in the previous quarter, while construction and information and communication posted stronger growth than in the preceding period.
The agriculture, forestry, and fishing sector grew 1.2% year-on-year, while industry and services expanded by 6.5% and 6.1% respectively. The three sectors all expanded at slower paces compared to the previous quarter.
Last month, the Bank of Uganda shifted its monetary policy gears by raising its policy rate for the first time since April 2016, when it embarked on an easing cycle to stimulate the economy. This was in reaction to the shilling’s weaker position against the dollar and higher international oil prices, which it forecast could lead to an increase in inflation. Another risk to its inflation outlook is stronger domestic demand, the Bank said.
The central bank seems confident that raising interest rates will have little effect on consumer and company spending. Its outlook for the next two to three years is an economy on a “steady growth path supported by robust domestic demand growth, public infrastructure investments, improving agricultural productivity, and recovery in foreign direct investment”.
The Bank, in its monetary policy statement, added:
The BoU’s Composite Index of Economic Activity (CIEA) shows that in the first eight months of 2018, annualised growth was about 7 per cent, which would suggest economic growth of about 6.5% in FY 2018/19.
Growth from the previous quarter was 1.9%, faster than the 1.1% quarter-on-quarter increase in Q3.
All three sectors contributed positively to growth in the fourth quarter. Agriculture, forestry and fishing grew 1.2% from the previous quarter, while value added in industry and services increased by 0.8% and 0.6% respectively.