Country Report Uganda December 2008

Outlook for 2009-10

• The president, Yoweri Museveni, will need all his political skills to defuse growing regional pressures in Uganda and stabilise the ruling National Resistance Movement (NRM), as ambitious politicians bid to succeed him.
• Falling global demand will hurt Uganda's open economy and hamper trade growth. The Economist Intelligence Unit has revised its economic growth forecast to 6% (previously 6.6%) in 2009 and 6.3% (previously 6.8%) in 2010.
• Real GDP growth rates of around 10% would be required to make a substantial impact on poverty, but Uganda is unlikely to achieve this over the forecast period, owing to infrastructure bottlenecks and the global downturn.
• The Bank of Uganda (the central bank) will seek to keep monetary policy tight to ensure that expansion in broad money remains manageable.
• We expect a moderation in the inflation rate over the forecast period, to an average of 7.2% in 2009 and 6.8% in 2010, as international food and oil prices ease.
• The trade balance is expected to improve in 2009, as oil prices fall, before beginning to slide in 2010, as import costs rise again. The current-account is forecast to record deficits of 6.5% of GDP in 2009 and 6.8% of GDP in 2010.

Monthly review

• Parliament has cleared the finance minister and the security minister of accusations of unfairly using political influence in the sale of land for around US$6m to the National Social Security Fund in the Temangalo affair.
• The clearance of the two senior government ministers means that MrMuseveni has avoided defeat at the hands of three rebel members of parliament, who have been outspoken in their criticism of him.
• In a promising start to what could be a long process the Allied Democratic Front, an Islamic organisation with reported links to al-Qaida operating in south-west Uganda, has agreed to peace negotiations with the government.
• A National Development Plan will replace the Poverty Eradication Action Plan in June 2009. It will be a useful organisational tool, but its ability to steer policy will be limited, as plans require strong political backing to be successful.
• The EAC, Comesa and SADC trade blocs have agreed to form a single entity in order to reduce costs and boost trade. However, reaching agreement in a larger bloc will be more difficult, and implementation will be extremely slow.
• Energy shortfalls have improved considerably, as emergency thermal power plantsincluding a 50-mw plant in Namanvehave come on stream, and the government has predicted that there will be no more daytime load-shedding.

This report covers the following industry codes:
SIC Code: 49
NAICS Code: 22