Transcript Country Focus: Uganda - African Development Bank

African Economic Outlook 2008/2009
23 April 2009
Presentation of the
COUNTRY FOCUS: UGANDA
At Imperial Royal Hotel, Kampala ,
July 23, 2009
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OVERVIEW
•The Ugandan economy grew by 7 percent in 2008 amidst the
turmoil in the region(effects from the Kenyan post election
violence, depletion of L. Victoria) and the global economic crisis.
•Expected to slow to 5.0 percent in 2009 and to 5.8 % in 2010,
due to the crisis
•Inflation was 12 % in 2008 due to high food and energy prices
but may reduce to 9.4 % in 2009 and to 8.4 % in 2010
•The GFC has threatened the Ugandan financial markets and the
real sector (trade, remittances, FDI etc).
•But Uganda is still a leader in Africa in social progress and
poverty reduction (more needs to be done)
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Uganda
Recent Economic Developments
Uganda’s real Gross Domestic Product (GDP) is estimated to
have grown by 7 per cent in 2008 and but is projected to
decline to about 5 per cent in 2009 and 5.8 per cent in 2010.
Figure - 1 Real GDP Growth and Per Capita GDP ($ PPP at constant prices)
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Recent Economic Dev’ts
• Challenges in 2008-unrest in Kenya, power
shortages -use of expensive diesel
• Food prices were positive-net exporter and most
grow their own food, (poor weather in 2009 has,
however, made many parts vulnerable)
• Real sector of the economy has been hit recently by
economic crisis-eg remittances down 56 %(BOU),
exports down about 10 %
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Recent Economic Dev’ts
• Growth continued to be driven by services sector
(about half of GDP), expanded by 10.6 in 2008
• Growth led by financial services, transport and
communications, public administration, and
defence.
• The financial sector generally spared the worst of
the crisis, except the stock market and some
extent the treasury bill mrkt
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Recent Economic Dev’ts, cont’d
• Agric.(22 % in 2008) grew only by 2.2
percent a slight increase from 1.7 in 2007,
may grow quicker with new NDP
• Coffee sector grew 16 % in 2008 but outlook
for 2009 is bad due to the crisis, food
production grew 2.6 % in 2008 and may
continue to grow due to regional trade
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Uganda
Negative effects of global economic crisis
Drop in tax revenue due to decreased trade and low
business activity—deficit/GDP increased from 2.0% to
3.5% between FY 07/08 and FY 08/09;
Reduction in internationally
reduction in Q1 2009;
bound
exports—10%
Fall in inward workers’ remittances—21% reduction
May 2009 (BoU data);
Reduction in both continuing and planned investments.
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Recent Economic Dev’ts, cont’d
•The industrial (24 %) in 2008, grew 8.8 % in 2008 and 8 % in
2007.
•Manufacturing was aided by the easing of power outages.
•The heavy investment in thermal power, however, drastically
increased fuel import volumes.
•Oil discovery may help ease fuel shortages and
manufacturing and even make Uganda a net oil exporter
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help
Figure 2 - GDP by Sector in 2008/09 (Percentage
)
Mning and quarrying
0%
Other Services
22%
Public
Administration and
Defence
3%
Transport
and
Communication
7%
Agriculture,
Forestry and
Fishing
25%
Manufacturing
8%
Hotels and
Restuarants
5%
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Wholesal
e and
Retail
13%
Construction
13%
Electricity and Water
4%
Recent Economic Dev’ts, cont’d
•In 2008, growth driven by private consumption, given
its large share of GDP.
•Investment growth also remained strong, private and
public investment rose 17 % and 15 % respectively,
private investments led by const.
•Consumption growth will slowed to 8.1 % in 2008 and
5.7 % in 2009, to 6 % in 2010 and public consumption
from 4.7 in 2008 to 2 % in 2009 then to 4.2 % in 2010.
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Recent Economic Dev’ts, cont’d
•Gross public and private investment will fall to
3 % growth in 2009 then to 10 % in 2010.
•Exports grew at a slow 2.5 % in 2008 and will
remain low in the next two years
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Recent Economic Dev’ts
• Growth continued to be driven by services sector
(about half of GDP), expanded by 10.6 in 2008
• Growth led by financial services, transport and
communications, public administration, and
defence.
• The financial sector generally spared the worst of
the crisis, except the stock market and some
extent the treasury bill mrkt
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Table 1 - Demand Composition
Percentage
of GDP
Percentage changes,
(current
volume
price)
Gross capital formation
Public
Private
Consumption
Public
Private
External sector
Exports
Imports
Real GDP growth rate
Contribution to real
GDP growth
2000
2007 2008(e) 2009(p) 2010(p) 2008(e) 2009(p) 2010(p)
19.0
5.8
13.2
92.3
14.6
77.6
-11.2
10.9
-22.2
22.6
5.1
17.5
92.3
11.9
80.4
-15.0
16.1
-31.1
16.5
15.0
17.0
7.7
8.1
3.0
3.0
3.0
5.3
2.0
5.7
10.0
10.0
10.0
7.0
4.2
7.3
2.5
13.3
1.9
0.7
2.4
9.6
4.7
3.5
0.7
2.7
7.1
0.5
6.6
-3.6
0.4
-4.0
0.7
0.2
0.5
4.9
0.2
4.7
0.1
0.3
-0.2
2.2
0.5
1.7
6.5
0.4
6.0
-2.5
0.4
-2.9
7.0
5.6
6.1
Source: Data from Uganda Bureau of Statistics (UBOS); estimates (e) and prediction (p) based on authors'
calculations.
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Macroeconomic Policies
Fiscal Policy
•In 2008, the government targeted infrastructure
development, including roads and energy (and in
2009 added agriculture
•Total revenue and grants at 18.3 % of GDP in
2007/08, up from 18 % in 2006/07, but may decline
to 16.7 % in 2008/09 and 15.5 % in 2009/10 due to a
decline in grants from donors and but mainly due to
decreased tax revenues.
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Fiscal Policy cont’d
•The tax/GDP ratio rose from 12.4 % in 2006/07 to 12.8 % in
2007/08, but is expected to fall back in the next two years.
Expenditure/ increased from 19.9 % in 2006/07 to 20.5 % in
2007/08, due to increased spending on infrastructure, will
decline in the next two years to 18.1 %.
•Overall deficit deteriorated slightly to 2.2 % of GDP in 2008,
from 1.9 % in 2007, and to 2.4 % in 2009 and 2.8 % in 2010.
•Grants/GDP was unchanged at 5.1 % in 2008, but outlook for
2009 and 2010 is for possible declines.
Debt/GDP has reduced from 63.7 % in 2003 to 12.5 % in 2008,
may increase slightly in 2009 and 2010.
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Table 2 - Public Finances (percentage of GDP)
1999/2000
2004/05
2005/06
2006/07
Total revenue and grants
Tax revenue
Oil revenue
Grants
Other revenues
Total expenditure and net lending
(a)
Current expenditure
Excluding interest
Wages and salaries
Goods and services
Interest
Capital expenditure
16.2
10.2
0.0
5.5
0.5
19.4
11.8
0.0
7.4
0.2
17.7
12.3
0.0
4.9
0.5
18.0
12.4
0.0
5.1
0.5
18.3
12.8
0.0
5.1
0.4
16.7
12.3
0.0
4.0
0.4
15.5
11.9
0.0
3.2
0.4
23.0
10.4
9.4
4.0
3.5
1.0
8.4
20.1
12.5
11.0
4.8
4.9
1.5
7.7
19.9
12.8
11.4
4.8
4.9
1.4
7.2
19.9
12.2
11.1
4.7
4.7
1.1
7.2
20.5
12.7
11.4
4.5
5.7
1.3
8.3
19.0
11.4
10.2
4.0
4.8
1.1
7.9
18.1
10.4
9.4
3.7
4.4
1.0
7.8
Primary balance
Overall balance
-5.8
-6.8
0.7
-0.8
-0.8
-2.2
-0.8
-1.9
-0.9
-2.2
-1.2
-2.4
-1.7
-2.6
a. Only major items are reported.
Source: Data from MFPED; estimates (e) and prediction (p) based on authors' calculations.
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2007/08(e) 2008/09(p) 2009/10(p)
Figure 3 - Stock of Total External Debt (percentage of GDP) and Debt Service
(percentage of exports of goods and services)
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Monetary Policy
•Inflation surged to 11.8 per cent in 2008 from 6.1
per cent in 2007. decrease in 2009 to 9.4% and
9.4 % in 2010 as the economy cools and fuel
prices do not rise again due to low world oil
prices.
•The shilling appreciated strongly at the end of
2007 and early 2008 due to favorable terms of
trade and higher capital inflows. Further
depreciation of the shilling against the dollar to
about 2026Shs/$ in 2009 and 2087 in 2010.
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External Position
•Exports of coffee increased by 32 % in 2007 and 23 %
in 2008 due to higher prices and increased
production. On the other hand, exports of fish
declined 11 %.
•Export/GDP declined to 11.1 % in 2008 from 15.5 %
in 2007, Outlook for 2009 and 2010 is poor.
• Imports increased 35 % in 2008, primarily due to
increasing global oil prices-import/GDP rose from
21.8 % in 2007 to 23.0 % in 2008.
•Trade deficit as a percentage of GDP rose from 6.3 %
in 2007 to 11.9 % in 2008, to 9.3 % in 2009 and 10.4%
in 2010.
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External Position, cont’d
•Current account balance deteriorated from a
deficit of 2.8 % of GDP in 2007 to 9.8 % in
2008, to a poor 2009 at 7.5 % and 9.1 % in
2010.
•International reserves to about 5 months of
imports of goods and services by the end of
2008. But outlook for 2009 and 2010 is
poorer
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.
Table 3 - Current Account (percentage of GDP)
2000
Trade balance
2005 2006 2007 2008(e)
2009(p) 2010(p)
-7.4
-7.3 -9.3 -6.3
-11.9
-9.1
-10.1
Exports of goods (f.o.b.)
7.5
10.1 10.8 15.5
11.1
10.9
9.9
Imports of goods (f.o.b.)
15.0
17.4 20.1 21.8
23.0
20.0
20.1
Services
-3.8
-1.3 -2.7 -3.2
-3.4
-3.5
-3.2
Factor income
-2.5
-2.5 -2.2 -1.9
-1.7
-1.8
-1.7
8.7
7.1
7.1
6.1
0.0 -3.5 -2.8
-9.8
-7.3
-8.9
Current transfers
8.4
Current account balance
-5.4
11.0 10.7
Source: Data from UBOS; estimates (e) and prediction (p) based on authors'
calculations
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Social context and human rsce devt
• Uganda has devoted great efforts and achieved
substantial successes towards achieving some MDGs,
including HIV/AIDs and UPE, but more efforts are
needed to sustain progress an meet the other MDGs.
• Other problems include inefficiency in the management
of the social budget, and inadequacy of resources.
• Officially unemployment at only 3.2 percent, it is much
higher if disguised unemployment is counted.
• unemployment of recent university graduates is
estimated in 2008 at about 32.2 per cent in the capital
Kampala and 23 per cent nationally.
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Thank You
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