Uganda Economic Outlook
GDP growth accelerated to 7.5% year-on-year in the third quarter of 2022, up from 6.5% in the preceding quarter, supported by a favorable base effect. Fourth quarter data is fairly positive. Monthly economic growth was solid despite easing from Q3, while the private-sector PMI averaged higher in Q4 than in Q3 and business sentiment remained optimistic. The economy started 2023 on a strong footing, with the PMI rising to a nine-month high in January. In other news, the budget framework for the fiscal year 2023–2024 was announced in January. In line with the IMF’s Extended Credit Facility, the proposed budget is set to narrow the fiscal deficit by increasing revenue and constraining expenditure, which will cap domestic demand.
January’s inflation accelerated to 10.4% (December: 10.2%). The increase was largely due to a base effect stemming from January 2022´s drop in transport fares. However, the Bank of Uganda (BoU) maintained the policy rate at 10.00% at its 6 February meeting. Inflation will ease from current highs this year, but will remain above the BoU’s 5.0% target.