Country Report Uganda July 2009

Outlook for 2009-10

• The president, Yoweri Museveni, will try to reassert his control over the ruling National Resistance Movement (NRM) as ambitious politicians bid to succeed him. In-fighting will intensify as the 2011 presidential election draws closer.
• Regional disputes, notably between the central government and the Buganda region over land reform, will provide a focus for the opposition parties, but to pose a serious threat, they would need to form a coalition, which is unlikely.
• The Economist Intelligence Unit expects a loosening of monetary policy over the forecast period, primarily through lower interest rates, in response to the slowing economy and some easing of consumer price inflation.
• Weak global demand will hurt Uganda's open economy and hamper trade growth. Real GDP growth is forecast to fall to 4% in 2009, rising to 5% in 2010.
• We expect inflation to fall to an average of 11% in 2009 and 8.5% in 2010 as food and oil prices ease, but a looser monetary policy will prevent it from falling faster.
• The external trade deficit will rise only slightly in 2009-10; although weak global demand will restrict export growth, falling commodity prices will limit import costs. The current-account deficit will average 10.1% of GDP in 2009-10.

Monthly review

• The NRM won more than 80% of vacancies in local council elections in May, performing unexpectedly well in north Uganda. The elections were marked by low voter turnout and almost half the seats were uncontested.
• Relations with the Democratic Republic of Congo deteriorated in June over a boundary dispute in West Nile. The Congolese began building a police post within 50 metres of a Ugandan customs post. The issue remains unresolved.
• Improving agriculture was the main theme of the budget, announced in June. The government will increase spending to improve inputs, technology and extension services, as well as to tackle pests and diseases.
• The budget projects an increase in donor dependency to 33% of revenue as the government cut some taxes in a bid to stimulate growth.
• The finance minister announced that real GDP growth in 2008/09 was 7%, compared with a Sub-Saharan average of only 2.4%. This was driven by the services sector, which accounts for over half of GDP, and which grew by 9.4%.
• The inflation rate eased to 12.4% in May, and the government expects it to continue to fall. The main driving factor, domestic food price inflation, will be contained by higher domestic production and lower demand from Kenya.

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