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Bank of Uganda Forecasts Sluggish Growth due to Second COVID-19 Wave


By Rogers Wanambwa 

KIU, Main Campus – The Bank of Uganda (BoU) has amended its growth projections for Financial Year 2021/22. BoU says that all high-frequency indicators available show that the momentum of economic activity for the quarter to July 2021, decreased.

It had been expected that the tourism sector was to grow much faster when Entebbe International Airport and tourist sites reopened. Nevertheless, this was affected by the second lockdown regardless of international tourists being allowed to move to and fro their destinations.

“The COVID-19 restrictive measures that remain in place will continue to weigh on the economic activity, with economic growth projected in the range of 3.5-4.0 percent in the financial year 2021/2022. In particular, between COVID-19 stops and starts, tourism is unlikely to return to normal levels any time soon,” said Governor Emmanuel Tumusiime-Mutebile.

Besides, the second wave lockdown left even more places closed, adding to others like entertainment and recreation and bars, that have been closed for 17 months, not to mention the education sector.

According to BoU Executive Director for Research, Adam Mugume, the economic growth is anticipated to be slower by 0.5% unless the pandemic worsens in the short term.

However, the Central Bank remains optimistic that if vaccination picks up in the latter part of the year and restrictions on movements are eased, gradual economic growth recovery is imminent. 

Nevertheless, the impact of the pandemic especially on the private sector could linger on for the next two years.

Growth is predicted to pick up in the ensuing years and could grow by between 6 and 7 percent in 2024/2025.

Still, this will depend on external aspects like global markets improving which would mean exports picking up, and improvement in tourism, investments in the oil sector, and general restoration of faith in the business confidence.

“Significant uncertainties continue to surround the economic outlook. The outlook continues to be highly conditional on the containment of the spread of the pandemic which will be premised on the vaccination rates and the extent to which SOPs are observed. The emergency of vaccine-resistant variants would, however, prompt the reintroduction of restrictions of gatherings and mobility, which will derail the economic recovery,” said Mutebile.

Inflation is expected to remain low too, due to the low economic activity. This implies an output void because even the low production levels cannot be outstripped by demand which is also low.

It was noted by Mugume that some sectors have seen price increases, especially in the transport sector, while weather effects on food-crop output are likely to impact inflation.