- Capital: Kampala
- Region: East Africa
- Official languages: Swahili and English
- Independence Day: October 09, 1962
- Area: 241,000 sq km
- Population (2018): 42.7 million
- REC membership: COMESA, EAC, IGAD
- WTO membership: January 1, 1995
- GDP (2018): US$ 27.461 billion
- GNI per capita (2018): US$ 620
- Currency: Ugandan shilling
The Ugandan economy reported strong growth in 2019, estimated at 6.3%, largely driven by the expansion of services. Services growth averaged 7.6% in 2019, and industrial growth 6.2%, driven by construction and mining. Agriculture grew at just 3.8%. Retail, construction, and telecommunications were key economic drivers. Inflation is expected to remain below 5%, strengthening the domestic economy.
Government spending continues to increase, underpinned by public infrastructure and capital investments for the nascent oil and gas industry. Expenditures have increased faster than domestic revenues, widening the fiscal deficit in 2019. The deficit is largely financed through external borrowing, supplemented with domestic securities. Despite the rise in the deficit, Uganda is classified at low risk of debt distress. However, debt reached an estimated 43.6% of GDP in 2019, up from 25% in 2012, raising medium-term concerns. Lending remains within IMF limits, but risks have increased due to higher costs of debt servicing and infrastructure investments.
Exports, dependent on primary products, have not kept up with imports, widening the trade deficit to an estimated 9.4% of GDP in 2019 from 8.3% in 2018. The increasing current account deficit has been largely financed by foreign direct investment (2.6% of GDP) and externally financed projects. External reserves were at a comfortable 4.4 months of imports in 2019, while the exchange rate was stable, averaging 3,727 Ugandan shillings per dollar.
The poverty rate fell during the past two decades but rebounded in 2016/17, reaching 21.4%, meaning that 10 million people were living below the national poverty line. Inequality has changed little. More than two-thirds of the working-age population is in agriculture. Four-fifths of workers are own account workers or contributing family workers, with one-fifth in paid employment or themselves employers. Youth unemployment is a challenge.
Retail, construction, and telecommunications drive the economy, with mining, transport, and hospitality expected to grow as oil and gas investments are made. Price stability will boost domestic business confidence while fiscal policy is likely to remain accommodating.
Urban development with rapid urbanization, rising population density, increasing market size and access, clustering of skills and technology, and proximity to financial institutions offers opportunities for business development, firm creation, and new jobs. Kampala was, until 2019, Uganda’s only urban agglomeration classified as a city. The reclassification of nine municipalities as regional cities can promote new opportunities. The new cities will be phased in over three years, expanding infrastructure such as paved roads, power distribution, water and sanitation services, and waste management.
Poor global growth, affected by the US-China trade tensions and stagnant growth and subdued demand in Europe risks reducing Ugandan exports. Domestically, adverse weather can lower agriculture production, harming the trade balance and current account balance, given the importance to Uganda of exporting food to the East Africa region. Other domestic risks include weak revenue mobilization, weak private sector credit growth, and fiscal expansion in the run-up to the 2021 elections.
Uganda is transitioning to a service economy but faces low productivity and low job creation. The economy has become more productive, but productivity differences across industry, services, and agriculture are large. Industrial productivity is seven to eight times higher than in the other two sectors, but it cannot absorb the 600,000 youths entering the jobs market each year.
Last updated: April 2020