Uganda Economic Outlook
After ending 2022 on a softer note, the Ugandan economy entered 2023 on a stronger footing. Economic activity growth accelerated to 4.9% year on year in Q1, above the prior quarter’s 4.5% increase. Looking at monthly data, the economy’s robust performance in March chiefly drove the upturn: Activity tallied an annual 5.9% expansion—the strongest since September 2022. Similarly, seasonally adjusted month-on-month growth in March was 1.9% (February: -0.2% mom)—the steepest since July 2020. Moving to Q2, economic activity is likely remaining robust. Private-sector PMI data revealed conditions strengthened significantly in April, thanks to improving demand and increasing staffing levels. Additionally, borrowing costs remained unchanged, and price pressures moderated to a nine-month low in April, boding well for private spending in Q2.
April’s inflation fell to a nine-month low of 8.0% (March: 9.0%) amid moderating price pressures for food, transport and housing and utilities. Inflation will likely remain above the Bank of Uganda’s 5.0% target this year. That said, price pressures should continue to moderate from current levels amid still-high interest rates.