Country Report Uganda March 2009

Outlook for 2009-10

• The president, Yoweri Museveni, will attempt to reassert his dominance over the ruling National Resistance Movement (NRM) following the recent large cabinet reshuffle as ambitious politicians bid to succeed him.
• Falling global demand will hurt Ugandas open economy and hamper trade growth. The Economist Intelligence Unit has downgraded the economic growth forecast to 4% in 2009, rising to 5% in 2010 (previously 5.1% and 6%).
• We forecast a widening of the government deficit to 3.4% of GDP in 2009 and 3.5% of GDP in 2010 as revenue fails to keep pace with expenditure growth.
• The Bank of Uganda (the central bank) now appears to rank the economic slowdown as a greater risk than inflation and we expect a loosening of monetary policy over the forecast period, primarily through low interest rates.
• We expect inflation to moderate to an average of 8.5% in 2009 and 6.8% in 2010 as international food and oil prices ease, but persistent high domestic food inflation and looser monetary policy will prevent it from falling faster.
• The value of trade will stagnate in 2009 as weak global demand restricts export growth and falling commodity prices reduce import costs. The current-account deficit is forecast to be 5.8% of GDP in 2009 and 5.3% of GDP in 2010.

Monthly review

• The president announced a cabinet reshuffle in February, halfway through the current parliament's lifetime, retaining 16 cabinet members in their previous posts, reshuffling eight others and sacking two.
• The major victim of the reshuffle was Ezra Suruma, the minister of finance who was demoted to presidential advisor, paying the price for his connection to a recent scandal involving the National Social Security Fund (NSSF).
• The political influence of Amama Mbabazi has increased despite his involvement in the NSSF scandal. He has retained his job at the important Ministry of Security and a number of his supporters were promoted.
• Kizza Besigye was re-elected as party chairman of the opposition Forum for Democratic Change in February, and immediately became favourite to be the party's presidential candidate in the 2011 election.
• In an effort to improve regulation, a microcredit bill will be presented in March to bring the Savings and Credit Co-operatives under the supervision of the central bank.
• A China Enterprises Chamber of Commerce was opened in Kampala in February, which is expected to boost Chinese involvement in the processing of Ugandan agricultural exports.

Source: Country Report