Bank of Uganda Says Economic Outlook ‘Extremely Uncertain’

Bank of Uganda Retains Policy Rate at 7%

Uganda’s central bank kept the key policy rate unchanged at seven percent but warned that the “economic outlook is extremely uncertain”, largely due to the Covid-19 pandemic.

“Indeed, economic growth in Financial Year (FY) 2020/21 is projected at 2.0-3.0 percent and is expected to increase to 5.0-6.0 percent in FY 2021/22 and to 6- 7 percent in the outer years,” said Prof. Emmanuel Tumusiime-Mutebile, Governor.

However, it noted a slight improvement in both foreign and domestic demand which, along with the easing of the lockdown and a stable exchange rate, are supporting economic growth recovery.

The regulator further waned that inflation would remain above its five percent target until about 2022. Core inflation rose to 6.2% in September, the highest in over four years.

The country’s economy estimated to have contracted by 2.7% in the second quarter, however, the gradual lifting of containment measures, rising investor, and consumer confidence have allowed businesses to resume production, almost at pre-crisis levels.

According to the IMF, Uganda will slide into recession with annual growth expected at -0.3 percent.