Uganda Economic Outlook
Annual GDP will have accelerated so far in H2 2023. Economic activity expanded at a stronger 6.9% year on year in Q3 (Q2: +5.2% yoy), marking the best result since Q2 2021. The private-sector PMI remained in expansionary territory in Q3—despite easing slightly from Q2’s average. In addition, October’s PMI revealed another improvement in business operating conditions thanks to higher employment levels and stronger demand. Moreover, both headline and core inflation receded in Q3 and further in October. This, coupled with lower interest rates since August, will have supported consumption. In other news, the U.S.—Uganda’s sixth-largest trade partner—terminated Uganda’s preferential trade status under the African Growth and Opportunity Act in late October in response to the country’s draconian anti-LGBTQ+ law adopted in May. The move bodes ill for Uganda’s import bill and export revenue.
In October, inflation eased to a two-year low of 2.4% (September: 2.7%) on softer price increases for food, which more than offset stronger price increases for housing and utilities. In 2024, average inflation will be lower than in 2023 and slightly below the Bank of Uganda’s 5.0% target on lower year-on-year prices for key commodity imports and a base effect.