Uganda's economy set to rebound in 2024 after a slowdown in 2023

Ugandan real GDP growth is expected to pick up to 5.8% in 2024 after a slowdown to 4.6% in 2023.
Strong fixed investment growth will keep demand for imported capital inputs elevated, leading to a real import growth of 9.2% in 2024.
The outlook for exports is brighter, underpinned by a positive outlook for domestic consumption in 2024.

One of the main drivers of growth is strong fixed investment. The development of Uganda’s oil sector continues to underpin investment growth, with projects such as the $10 billion Lake Albert Oil Project and the $4 billion East Africa Crude Oil Pipeline attracting significant investment inflows.

This will see fixed investment contribute 2.2 percentage points (pp) to headline growth in 2024, marginally below the 2.5pp contribution expected in 2023. This is expected to keep demand for imported capital inputs elevated, leading to a real import growth of 9.2% in 2024.

However, the outlook for exports is brighter, the report noted.

“Our Agribusiness team forecasts that coffee production – which made up 24.0% of Uganda’s exports in 2022 – will grow by 5.3% in 2024, up from 4.8% in 2023,” Fitch stated.

This will be supported by improving yields, the expected maturation of coffee trees, and strong government incentives (via the National Coffee Policy). In all, this will underpin real export growth of 5.2% and see net exports’ drag on headline growth narrow from 4.1pp in 2023 to 2.1pp in 2024.

Moreover, the outlook for domestic consumption is also positive. Private consumption is expected to grow by 6.4% in 2024, contributing 5.6pp to real GDP growth. This growth is expected to be supported by lower inflation and the pass-through effects of monetary easing.

The Bank of Uganda cut its policy rate by 50 basis points (bps) to 9.50% in August 2023, and further loosening is expected this year, taking the policy rate to 8.50% by year-end. This is expected to provide some tailwinds to credit demand over the coming months.

However, there are risks to this outlook. One of the major risks is the suspension of Uganda's eligibility under the Africa Growth & Opportunity Act (AGOA). The United States announced this decision in October 2023, which could weigh on exports in 2024, although Uganda is less exposed to the US market than others in the East African Community.

Moreover, should the shilling weaken beyond expectations, this would add upside pressure to import costs, keep inflation higher for longer, and disincentivize further monetary easing.