Uganda's economy slows down to 3.9%

Jun 07, 2017

“During the FY2016/17, all the sectors experienced slower growth compared to FY 2015/2016."

PIC: The fishing industry is among those that declined.

ECONOMIC GROWTH


Uganda's Gross Domestic Product (GDP) for the fiscal year Financial Year 2016/2017 slowed down from the 4.7% that was recorded in the Financial Year 2015/2016 to 3.9%, says Dr. Chris Mukiza, Uganda Bureau of Statistics (UBOS) Macro Statistician.

This 0.9 percentage points lower than the revised growth of the FY2015/16.

"During the FY2016/17, all the sectors experienced slower growth compared to FY 2015/2016," Mukiza said.

Particularly, agriculture, forestry and fishing sector dropped to 1.3% in the FY2016/17 from 2.8% recorded in FY2015/16. Agricultural decline was noted especially in cash crops from 7.9%in FY2015/16 to 0.4% in FY2016/17.

Overall, agricultural sector contribution to total GDP was 25% in 2016/17 compared to 23.7% due to the high price increases of food crops during the 2016/17 Financial year.

It should be noted that Uganda's annual headline inflation rose to 7.2% in May 2017 from 6.8% that was recorded in April 2017 according to data from the Uganda Bureau of Statistics.

The Bureau attributes the rise to higher prices especially of food crops.

"Food crop growing activities were much lower than the population growth. This led to the rampant famine that ravaged most parts of the country," Mukiza added.

Examples of cash crops that registered positive growth include coffee (3.9%), cotton (22.3%), cotton (22.3%), and flowers (15.5%).

However, value added declines were registered for tea (-19.3%), Cocoa (-13.7%), Vanilla (-48.8%), Tobacco (-48.3%), sugar cane (-8.3%, and Palm (-9.2%).

"Cash crops that are more tolerant to adverse weather conditions registered growth whereas weather sensitive cash crops were affected by unfavourable weather," Mukiza said.

Other sectors that led to the decrease include mining and quarrying from 11.4% in FY2015/16 to 4.5% in FY2016/17, entertainment and recreation (-6.1%), manufacturing financial and insurance activities.

Industry sector contracted from 4.7% in FY2015/16 to 3.4% in FY2016/17especially the construction sector.

"The slower growth in the industry sector was attributed to weaker performance of mining and quarrying and construction activities compared to last year," Mukiza noted.

The whole sale and retail trade activities contracted by 0.9% in FY2016/2017 compared to the 3.6% growth in FY2015/16.

"The slowdown was due to reduced supply of tradable goods that would have been generated from the agricultural sector," Mukiza said. Adding that, the performance was affected by subdued public demand.

​Arts, entertainment and recreation further dropped to -6.1% in FY2016/17due to slowdown in growth of household final consumption expenditure during the year.

Finance services such as Central bank, commercial banking, insurance and foreign exchange bureaus and other Auxiliary to financial intermediation dwindled from 5.8% in FY2015/16 to -1.8% FY2016/17.

This was a second drop experience in financial activities following the previous one witnessed in FY2011/12 which shrank by 1.0%.

It is important to note that during both periods(FY2011/12 and FY 2016/17), the financial institutions like commercial banks registered high profits owing to high prices charged for credit and other bank facilities.

During one interview with New Vision, Dr. Fred Muhumuza, Senior Economist and researcher said Uganda's trend of growth has been down for the last few decades.

However, he noted that there is need for massive reforms such as restructuring the economy so as to ensure economic growth rather than prioritising infrastructure (roads).

 

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