Since the second half of the 1980s, Uganda has entered a long period of relative political stability, which has allowed the country to ensure high growth rates over the past thirty years. Among the main achievements are an increase in life expectancy, increased access to education and a significant reduction in poverty.
The service sector is actively developing in the country due to the strengthening of demand from the growing population with increasing incomes. Today, Uganda is one of the fastest growing countries in Africa, and its economic potential remains high due to the country's large reserves of natural resources and fertile lands. However, this potential remains unrealized. Despite the obvious successes that the State has achieved in recent years, Uganda is still one of the poorest countries in the world with a high level of inequality, an increasing informal economy and a significant proportion of the population engaged in low-efficiency subsistence farming. The Government's task is to diversify the economy in order to increase its competitiveness and integration in the world market, as well as to develop infrastructure to ensure the inflow of foreign investment.
The COVID-19 pandemic led to the first recession since 1985. Indicators of real GDP in 2020 decreased by 1.3%, but already in the next 2021. Uganda has demonstrated a rapid pace of economic recovery due to the normalization of consumer behavior. Despite the decline in production in the agricultural sector, GDP growth was 6.0% due to high indicators in industry and services. Uganda has also demonstrated resilience in the face of a global economic slowdown in 2022, rising commodity prices and geopolitical instability. Real GDP growth in 2022 was 4.9%, according to the IMF. At the same time, the African Development Bank (AfDB) and Oxford Economics give an even more positive assessment of the pace of development of the Ugandan economy in 2022 at the level of 6.3%. This growth was achieved due to high rates in the service sector recovering from COVID-19.
According to the IMF forecasts, real GDP growth in 2023 will be 5.7%, while the AfDB assumes higher rates of 6.5%, provided that the development of the global economy accelerates. However, high inflation and tightening monetary policy, as well as a slowdown in growth in the country's industrial sector at the end of 2022, may lead to a reduction in the rate of increase in real GDP in 2023, which is reflected in the more conservative forecast of Oxford Economics, which expects growth of the Ugandan economy at 5.2%. The main driver of the country's development may be the start of oil production in 2025.
According to the IMF forecast, real GDP growth as a result of the planned launch of hydrocarbon production could reach 7.5% in 2025, while Oxford Economics expects an increase in economic growth rates to 8.2% by 2026.
GDP by PPP per capita of Uganda in 2022 amounted to 3.0 thousand US dollars, and by 2028, according to IMF forecasts, it will reach 4.1 thousand US dollars, demonstrating an average annual growth rate of 4.9% in 2023-2028.
Amid rising commodity prices, inflationary pressure indicators in Uganda reached 6.8% in 2022. By October 2022, the interest rate was increased by the country's Central Bank to 10%. This measure, as well as the stabilization of prices on the world market, allowed, according to the Central Bank, to ease inflationary pressure. However, the forecast for 2023 remains unclear, as the further dynamics of inflation will depend on the external price environment, as well as the impact of weather conditions on agricultural production. In 2023 inflationary pressures will remain high at 7.6%, according to the IMF, or 7.0%, according to Oxford Economics. The annual inflation rate will begin to decline only by 2024 due to the tight monetary policy of the Central Bank of Uganda and the expected decline in inflation in the food and energy sectors.
