Inflation Trends: Uganda’s annual inflation rate fluctuated, reaching 4.9% in June 2023 but declining to 3.9% in July due to drops in core inflation and food-related inflation. Core inflation also decreased from 4.8% to 3.8% during the same period.
Business Optimism: Business sentiment improved consistently from May to July 2023, with the Business Tendency Indicator (BTI) rising from 58.78 to 64.21, indicating growing confidence in the business outlook.
Exchange Rates: The Uganda Shilling strengthened against the US Dollar in July 2023 by 1.26%, benefiting from sustained budget support and increased export earnings. However, this appreciation might impact export competitiveness.
Interest Rates: The Central Bank Rate (CBR) remained steady at 10% in July 2023, indicating a consistent monetary policy approach. Lending rates for Ugandan Shilling loans decreased from 20.14% in May to 18.41% in June 2023, suggesting potential credit relaxation, while foreign currency loan rates showed a slight increase from 8.50% to 8.83% during the same period.
Domestic Credit: While net credit to the government increased by 2.21% in June 2023, private sector credit slightly decreased by 0.60%. Changes were observed in credit distribution across sectors, affecting investment prospects.
Trade Balance and Terms of Trade: Uganda’s trade balance improved in June 2023, with a reduced deficit (from $282.08M in May to $247.43M in June 2023) and increased goods exports. The terms of trade index rose by 7.6%, signifying improved export value. However, trade imbalances with certain East African Community (EAC) nations persisted.
Economic Outlook: The Bank of Uganda forecasts a 6.0% to 6.5% economic rebound in the 2023/24 fiscal year, driven by investments in various sectors. Strong external demand and government support could lead to over 7% growth, but risks like global economic weakness, lower commodity prices, and climate shocks remain. Regional trade integration and government spending are potential positive factors.
