Country Report Uganda November 2009

Outlook for 2010-11

• Opposition to the rule of the Ugandan president, Yoweri Museveni, will intensify and a leadership rival could emerge from within the ruling party to take advantage of the seemingly popular dissatisfaction with the president.
• Mr Museveni will face serious opposition from the Buganda kingdom but the Economist Intelligence Unit expects him to mollify this with assurances over land rights and resources, and to win a fourth term in the 2011 election.
• We expect interest rates to remain low in 2010-11 in response to slower economic growth. The Bank of Uganda (the central bank) will focus on improvements to regulations to tighten liquidity and improve credit access.
• Weak global demand will hurt Uganda's open economy and hamper trade growth. Real GDP growth is forecast to be 5% in 2010, rising to 6.5% in 2011.
• Food prices will remain high, driven by strong regional demand and a loose monetary policy, but we forecast a slight fall in the inflation rate from 12.9% in 2009 to an average of 8.8% in 2010-11 as better weather lowers food prices.
• Uganda's current-account deficit is expected to stall at around 6.3% of GDP in 2010 before widening to 7.8% of GDP in 2011 as capital imports for infrastructure spur import growth, financed by higher foreign investment.

Monthly review

• The government has announced plans for a bill that will limit the authority of cultural leaders like the king of Buganda but, in a bid to appease regional antipathy, a new tier of regional government will be introduced in July 2010.
• Opposition politicians have begun to use the Buganda struggle to promote their own agendas, hoping to benefit from the resulting turmoil. The Democratic Party has belatedly rediscovered its historical roots in the region.
• Government fears that the Buganda dispute could jeopardise Mr Museveni's bid for re-election in 2011 have receded as internal migration patterns show that ethnic Baganda account for only half of the kingdom's population.
• Irish- and UK-listed Tullow Oil discovered an estimated 700m barrels of oil in September, bringing the total confirmed reserves in the Lake Albert basin to around 1.5bn barrels with only 30% of exploration complete.
• Tullow has put its stake in two oilfields worth around US$1.5bn up for sale. Ten companies have prequalified for bidding and the sale will bring in new investors to share the cost of bringing the oil to market.
• Higher food inflation has pushed the year-on-year inflation rate to 14.5% in September, despite reports that the government stopped some food exports to Sudan and a long-term forecast predicting better weather to come.