Country Report Uganda June 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, in particular a clash with the Buganda region over land reform, will provide a focus for the opposition parties; but in order to form a serious threat they would need to agree on 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 11.1% in 2009 and 8.5% in 2010 as international food and oil prices ease, but high domestic food inflation and looser monetary policy will prevent it from falling faster.
• The external trade deficit will stagnate in 2009-10 as weak global demand restricts export growth and falling commodity prices limit import costs. The current-account deficit is forecast at 10.6% of GDP in 2009-10.

Monthly review

• Relations between Uganda and Kenya have suffered as the Migingo Island affair stumbles on. The joint verification exercise to determine ownership of the island got under way in May and is due to finish by June 1st.
• A recent opinion poll by Afrobarometer has shown continued high levels of support for the NRM. Unemployment (28%) has replaced education as the second most serious concern, with poverty (43%) still in first place.
• A new political group, the Uganda Federal Alliance, was formed in April by an ambitious MP from Buganda, Beti Kamya, hoping to take advantage of the tribalism and regionalism currently rife in Uganda.
• The government's medium-term energy policy received another setback with the suspension of the Karuma Dam project. Despite this, the government says it will maintain subsidies and aims to reduce the cost of electricity by 50%.
• According to USAID's Famine Early Warning Systems Network, 1.83m people in the north-east are currently "food insecure". Food distribution has been hampered by poor rains, bad roads and occasional attacks on food convoys.
• Despite shortages in some regions, food supplies are expected to be higher in 2009 than 2008. Food insecurity stems not from a food shortage, or even high global prices, but from disincentives to sending food where it is most needed.

This report covers the following industry codes:
SIC Code: 49;1
NAICS Code: 22;11