Uganda eyeing a 6.4% economic growth rate in FY 2024/25

by Mmeeme Leticia Luweze
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During a recent media briefing on the state of the economy and the expenditure releases for the fourth quarter of the current financial year (FY 2023/24), the Ministry of Finance, Planning and Economic Development (MoFPED) announced that the economy is projected to grow by 6.4% in FY 2024/25.

During the media briefing held on Friday, April 12, 2024, Ramathan Ggoobi, the Permanent Secretary/Secretary to the Treasury at the Ministry of Finance, Planning, and Economic Development (MoFPED), stated that they anticipate a growth rate of 6.4% for FY 2024/25, highlighting a positive outlook for the economy.

Ggoobi shed light on the economic landscape, affirming that the economy is on track to achieve the projected 6.0% growth for this fiscal year. He highlighted the resilience shown in economic activity during the first half of the fiscal year, particularly noting the agricultural sector’s expected growth of 6.0%, up from 4.8% in the previous fiscal year. This growth is primarily attributed to increased production of food crops, cash crops, livestock, and fish.

The anticipated economic growth is expected to be propelled by advancements in the services sector, agriculture, and industrial production, bolstered by heightened aggregate demand and investment opportunities. The Ministry predicts that the agriculture sector will expand by 6.0% in the current financial year, compared to 4.8% last year, driven by increased production in food crops, cash crops, livestock, and fish.

The Ministry also noted that export volumes of key food crops such as maize, as well as fruits, vegetables, pulses, coffee, cotton, tobacco, and cocoa beans, have experienced significant growth during the first seven months of FY 2023/24.

The economy remains on track to achieve 6.0% growth projected for this Financial Year. In the first half of this year, economic activity remained on a recovery path, partly supported by continued implementation of growth-enhancing government programs and an increase in private sector activity. The economy registered GDP growth of 5.3% and 5.5% in the first and second quarters of FY 2023/24, respectively. The key growth drivers were higher production in the industry sector, growth in agriculture, forestry, and fishing sector, growth in services as well as an increase in household consumption, investments, and exports.

In the industrial sector, the Ministry observed a gradual resurgence in manufacturing and construction activities, supported by the persistence of stable inflation rates below the central bank’s target. The Ministry foresees that this favourable inflationary environment will stimulate both consumption and investment, fostering vibrant growth across trade, communication, hotel, and tourism services. Moreover, sustained recovery is expected in transportation and financial services, further bolstering economic prospects.

The document further delved into key insights regarding inflation, exchange rates, and external rates in Uganda as outlined below.

Inflation

Annual headline inflation averaged 2.9% in the first half of FY 2023/24 down from 8.0% in the second half of FY 2022/23 due to improved food supply alongside supportive monetary and fiscal policies. In March, Annual headline inflation was recorded at 3.3% down from 3.4% in February 2024.

Exchange Rate

The exchange rate has also been stable although the recent issuance of Government Treasury bonds in Kenya with high interest rates has recently caused some temporary weakening of the shilling against the US dollar by 1.8 percent between January and February 2024. This is because some portfolio investors in Government securities opted to exit Uganda for Kenya where the yields were higher, thereby reducing the supply of US Dollars in the market. However, this was a temporary shock that had already started to abate. The shilling traded at an average mid-rate of Shs 3895.8/USD in March 2024 from Shs 3873.6/USD, implying a depreciation of 0.6%.

External Sector

In the external sector, tourism inflows, foreign direct investment, and remittances remain strong, increasing by 29.5 percent, 21.3 percent, and 13.7 percent respectively in the first quarter of this financial year 2023/24 compared to the same quarter of FY 2022/2023. Total export receipts remain strong registering growth of 68.5% in the first half of 2023/24 compared to the first half of 2022/23.

Going forward, the economy is projected to grow at 6.4% in FY 2024/25 mainly driven by; growth in services, agriculture, and industry output, supported by an increase in aggregate demand and investments; efficient implementation of growth-supportive government programs and infrastructure; increased Oil & Gas sector activities; tourism, as well as growth in regional trade and exports.

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