1. 23 April 2009 African Economic Outlook 2008/2009 UNECA Presentation of the COUNTRY FOCUS: UGANDA At Imperial Royal Hotel, Kampala, July 23, 2009

2. UNECA 2 OVERVIEW The Ugandan economy grew by 7 percent in 2008 amidst the turmoil in the region(effects from the Kenyan post election violence, depletion of L. Victoria) and the global economic crisis. Expected to slow to 5.0 percent in 2009 and to 5.8 % in 2010, due to the crisis Inflation was 12 % in 2008 due to high food and energy prices but may reduce to 9.4 % in 2009 and to 8.4 % in 2010 The GFC has threatened the Ugandan financial markets and the real sector (trade, remittances, FDI etc). But Uganda is still a leader in Africa in social progress and poverty reduction (more needs to be done)

3. UNECA 3 Recent Economic Developments  Uganda’s real Gross Domestic Product (GDP) is estimated to have grown by 7 per cent in 2008 and but is projected to decline to about 5 per cent in 2009 and 5.8 per cent in 2010. Figure - 1 Real GDP Growth and Per Capita GDP ($ PPP at constant prices) Uganda

4. UNECA Recent Economic Dev’ts Challenges in 2008-unrest in Kenya, power shortages -use of expensive diesel Food prices were positive-net exporter and most grow their own food, (poor weather in 2009 has, however, made many parts vulnerable) Real sector of the economy has been hit recently by economic crisis-eg remittances down 56 %(BOU), exports down about 10 %

5. UNECA Recent Economic Dev’ts Growth continued to be driven by services sector (about half of GDP), expanded by 10.6 in 2008 Growth led by financial services, transport and communications, public administration, and defence. The financial sector generally spared the worst of the crisis, except the stock market and some extent the treasury bill mrkt

6. UNECA Recent Economic Dev’ts, cont’d Agric.(22 % in 2008) grew only by 2.2 percent a slight increase from 1.7 in 2007, may grow quicker with new NDP Coffee sector grew 16 % in 2008 but outlook for 2009 is bad due to the crisis, food production grew 2.6 % in 2008 and may continue to grow due to regional trade

7. UNECA 7 Negative effects of global economic crisis Uganda  Drop in tax revenue due to decreased trade and low business activity—deficit/GDP increased from 2.0% to 3.5% between FY 07/08 and FY 08/09;  Reduction in internationally bound exports—10% reduction in Q1 2009;  Fall in inward workers’ remittances—21% reduction May 2009 (BoU data);  Reduction in both continuing and planned investments.

8. UNECA Recent Economic Dev’ts, cont’d The industrial (24 %) in 2008, grew 8.8 % in 2008 and 8 % in 2007. Manufacturing was aided by the easing of power outages. The heavy investment in thermal power, however, drastically increased fuel import volumes. Oil discovery may help ease fuel shortages and help manufacturing and even make Uganda a net oil exporter

9. UNECA Figure 2 - GDP by Sector in 2008/09 (Percentage )

10. UNECA Recent Economic Dev’ts, cont’d In 2008, growth driven by private consumption, given its large share of GDP. Investment growth also remained strong, private and public investment rose 17 % and 15 % respectively, private investments led by const. Consumption growth will slowed to 8.1 % in 2008 and 5.7 % in 2009, to 6 % in 2010 and public consumption from 4.7 in 2008 to 2 % in 2009 then to 4.2 % in 2010.

11. UNECA Recent Economic Dev’ts, cont’d Gross public and private investment will fall to 3 % growth in 2009 then to 10 % in 2010. Exports grew at a slow 2.5 % in 2008 and will remain low in the next two years

12. UNECA Recent Economic Dev’ts Growth continued to be driven by services sector (about half of GDP), expanded by 10.6 in 2008 Growth led by financial services, transport and communications, public administration, and defence. The financial sector generally spared the worst of the crisis, except the stock market and some extent the treasury bill mrkt

13. UNECA 13 Table 1 - Demand Composition Percentage of GDP (current price) Percentage changes, volume Contribution to real GDP growth 200020072008(e)2009(p)2010(p)2008(e)2009(p)2010(p) Gross capital formation 19.022.616.53.010.03.50.72.2 Public 5.85.115.03.010.00.70.20.5 Private 13.217.517.03.010.02.70.51.7 Consumption 92.3 7.75.37.07.14.96.5 Public 14.611.9 4.7 2.04.20.50.20.4 Private 77.680.48.15.77.36.64.76.0 External sector -11.2-15.0 -3.60.1-2.5 Exports 10.916.12.51.92.40.40.30.4 Imports -22.2-31.113.30.79.6-4.0-0.2-2.9 Real GDP growth rate 7.05.66.1 Source: Data from Uganda Bureau of Statistics (UBOS); estimates (e) and prediction (p) based on authors' calculations.

14. UNECA Macroeconomic Policies Fiscal Policy In 2008, the government targeted infrastructure development, including roads and energy (and in 2009 added agriculture Total revenue and grants at 18.3 % of GDP in 2007/08, up from 18 % in 2006/07, but may decline to 16.7 % in 2008/09 and 15.5 % in 2009/10 due to a decline in grants from donors and but mainly due to decreased tax revenues.

15. UNECA Fiscal Policy cont’d The tax/GDP ratio rose from 12.4 % in 2006/07 to 12.8 % in 2007/08, but is expected to fall back in the next two years. Expenditure/ increased from 19.9 % in 2006/07 to 20.5 % in 2007/08, due to increased spending on infrastructure, will decline in the next two years to 18.1 %. Overall deficit deteriorated slightly to 2.2 % of GDP in 2008, from 1.9 % in 2007, and to 2.4 % in 2009 and 2.8 % in 2010. Grants/GDP was unchanged at 5.1 % in 2008, but outlook for 2009 and 2010 is for possible declines. Debt/GDP has reduced from 63.7 % in 2003 to 12.5 % in 2008, may increase slightly in 2009 and 2010.

16. UNECA Table 2 - Public Finances (percentage of GDP) 1999/2000 2004/052005/062006/072007/08(e)2008/09(p)2009/10(p) Total revenue and grants16.2 19.417.718.018.316.715.5 Tax revenue10.2 11.812.312.412.812.311.9 Oil revenue0.0 Grants5.5 7.44.95.1 4.03.2 Other revenues0.5 0.20.5 0.4 Total expenditure and net lending (a)23.0 20.119.9 20.519.018.1 Current expenditure10.4 12.512.812.212.711.410.4 Excluding interest9.4 11.011.411.111.410.29.4 Wages and salaries4.0 4.8 4.74.54.03.7 Goods and services3.5 4.9 4.75.74.84.4 Interest1.0 1.51.41.11.31.11.0 Capital expenditure8.4 7.77.2 8.37.97.8 Primary balance-5.8 0.7-0.8 -0.9-1.2-1.7 Overall balance-6.8 -0.8-2.2-1.9-2.2-2.4-2.6 a. Only major items are reported. Source: Data from MFPED; estimates (e) and prediction (p) based on authors' calculations.

17. UNECA Figure 3 - Stock of Total External Debt (percentage of GDP) and Debt Service (percentage of exports of goods and services)

18. UNECA Monetary Policy Inflation surged to 11.8 per cent in 2008 from 6.1 per cent in 2007. decrease in 2009 to 9.4% and 9.4 % in 2010 as the economy cools and fuel prices do not rise again due to low world oil prices. The shilling appreciated strongly at the end of 2007 and early 2008 due to favorable terms of trade and higher capital inflows. Further depreciation of the shilling against the dollar to about 2026Shs/$ in 2009 and 2087 in 2010.

19. UNECA External Position Exports of coffee increased by 32 % in 2007 and 23 % in 2008 due to higher prices and increased production. On the other hand, exports of fish declined 11 %. Export/GDP declined to 11.1 % in 2008 from 15.5 % in 2007, Outlook for 2009 and 2010 is poor. Imports increased 35 % in 2008, primarily due to increasing global oil prices-import/GDP rose from 21.8 % in 2007 to 23.0 % in 2008. Trade deficit as a percentage of GDP rose from 6.3 % in 2007 to 11.9 % in 2008, to 9.3 % in 2009 and 10.4% in 2010.

20. UNECA External Position, cont’d Current account balance deteriorated from a deficit of 2.8 % of GDP in 2007 to 9.8 % in 2008, to a poor 2009 at 7.5 % and 9.1 % in 2010. International reserves to about 5 months of imports of goods and services by the end of 2008. But outlook for 2009 and 2010 is poorer

21. UNECA Table 3 - Current Account (percentage of GDP) 2000 2005200620072008(e)2009(p)2010(p) Trade balance-7.4 -7.3-9.3-6.3-11.9-9.1-10.1 Exports of goods (f.o.b.)7.5 10.110.815.511.110.99.9 Imports of goods (f.o.b.)15.0 17.420.121.823.020.020.1 Services -3.8 -1.3-2.7-3.2-3.4-3.5-3.2 Factor income -2.5 -2.2-1.9-1.7-1.8-1.7 Current transfers 8.4 11.010.78.77.1 6.1 Current account balance-5.4 0.0-3.5-2.8-9.8-7.3-8.9. Source: Data from UBOS; estimates (e) and prediction (p) based on authors' calculations

22. UNECA Social context and human rsce devt Uganda has devoted great efforts and achieved substantial successes towards achieving some MDGs, including HIV/AIDs and UPE, but more efforts are needed to sustain progress an meet the other MDGs. Other problems include inefficiency in the management of the social budget, and inadequacy of resources. Officially unemployment at only 3.2 percent, it is much higher if disguised unemployment is counted. unemployment of recent university graduates is estimated in 2008 at about 32.2 per cent in the capital Kampala and 23 per cent nationally.

23. UNECA 23 Thank You