While the impact of the global economic crisis in the developed world has been adverse on many other economies of the world, the Uganda economy is live, well and strong. Provisional data by the Uganda Bureau of Statistics indicate that the Uganda economy has continued to grow at a robust rate of 7.0% per annum, despite the global economic crisis.
Even though there has been a slight decline in the growth that was projected during the fiscal year 2008/09, when growth was 9.0% per annum, Uganda’s economic growth performance was much higher than that of other countries in the region and in the rest of the world.
The size of the Ugandan economy is estimated at Uganda shillings 29.8 trillion by the end of June 2009, as compared to Uganda shillings 24.7 trillion in June 2008. This means that the size of our economy has expanded 8.4 times since the NRM took over power in 1986. Per capita GDP is now estimated at US$440 up from US$ 264 in 1986. This means that the size of the economy in dollars is now US$ 38.88 billion by PPP method (US$ 15.04 billion by official exch.rate).
The resilience of the Uganda economy in the midst of the on-going global economic crisis is, mainly, because of the diversification of the Ugandan economy and particularly the export sector and services sector. This is in contrast to the economies of some countries that have already experienced a contraction (or negative growth) in their national economic output. To take some examples, the economic output of the United States of America, Europe and Japan, among others, has actually, shrunk and many jobs have been lost. In contrast, in Uganda, although some businesses have experienced some fever, our continued impressive performance in the face of the global economic crisis is a manifestation of the sound economic policies of the NRM Government.
The source of this strong growth in Uganda has continued to come from the industrial and services sectors, while the agricultural sector has shown significant signs of activation. In the Industrial sector, formal manufacturing registered strong growth of 8.3%. Manufacturing registered strong annual growth of 7.2% during last financial year, although slightly less than the 7.6% growth recorded in the previous year.
The growth in this sub-sector was, mainly, as a result of the increase in growth of the food processing sub-sector. Growth was also registered in the textiles, clothing and footwear as well as chemicals, paint, soap and foam products, among others. The mining and quarrying sub-sector achieved a growth rate of 9.2% over the year.
A more recent evaluation of the industrial sector gives an indication of the resilience of the economy to external shocks, such as the global economic crisis. The index of industrial production, which broadly tracks the performance of the manufacturing sector, had an increase of 6.9%, in the quarter of January to March 2009, relative to the corresponding period in 2008. This suggests that, overall, manufacturing production has so far not been affected by the on-going global recession.
In the food processing sub-sector, the index of edible oil and fats production, dairy production, grain milling and sugar processing increased by 37.2%, 51.1%,39.6% and 33.9%, respectively, in the quarter of January to March 2009 compared to the same period in 2008. Cotton ginning registered a remarkable recovery with an annual increase of 245% in the Quarter of January to March 2009, albeit from a small base, reversing the decline the sector suffered in the previous four (4) quarters since January 2008.
Based on revised GDP data, the share of agriculture in total GDP continued to decline from 15.7% in fiscal year 2007/08 to 15.1% this financial year, even though the agricultural sector grew annually by 2.6%. This reflects a continued structural transformation of the Ugandan economy as other sectors continue to grow much faster than agriculture. The evidence for the undeniable fact that agriculture is growing is the fact that the recent Agricultural and Livestock Census recorded the existence of 11 million heads of cattle, 12 million goats, 37 million poultry and 3 million sheep and pigs each. This compares much more favorably to lower number of livestock that were being estimated before the census in 2007 as follows:- 7 million heads of cattle, 8.3 million goats, 27 million poultry and 1.7 million sheep and 2 million pigs. This example illustrates the fact that even though the share of agriculture in the total economy is declining, there is still substantial growth of agriculture. The cattle population in 1986 was only 3 million.
The service sector, which now accounts for 51.2% of total GDP, continued to register strong growth estimated at 9.4% per annum during financial year 2008/09.Growth in the transport and communications services sub-sector is estimated at over 20% in the current financial year, a continuation of equally good performance in the previous year. This was driven mainly by the posts and telecommunications sub-sector which is estimated to have grown by 32.2% during fiscal year 2008/09 compared to 22.6% in the previous year.
Over a five-year period, this sub-sector has registered an average growth of 24.4% per annum, thus achieving the fastest steady growth over the period relative to other sectors of the economy. There are now 8.6 million telephone connections in Uganda by December 2008, as compared to 5.2 million connections in December 2007. The telephone lines in 1986 were only 28.000.
Government’s objective in this sub-sector is to increase coverage of telecommunication and internet services access throughout the country by licensing more service providers and through public-private partnership arrangements. This policy objective has achieved impressive achievements so far. As more players get licensed, coverage has increased and increased competition has resulted in reduced unit cost of using these services. The tremendous improvement in the telecommunications and internet services has triggered the development of a number of consumer products in other sub-sectors, including the banking sector. This is increasing connectivity as well as productivity in the economy as a whole.
The financial services sub-sector is estimated to have increased by 21.7% during the last fiscal year, compared to a growth of 24.1% per annum achieved in the previous year. Total deposits within the formal financial sector grew from Shs. 5.2 trillion in June 2008 to Shs. 6.1 trillion by March 2009, while lending by formal financial institutions to the private sector grew from 2.9 trillion in the last financial year to 3.7 trillion by March 2009. It is not surprising that two new international banks were licensed since last financial year, which will lead to increased competition in the financial sector and a long-awaited reduction in interest rates.
By H.E. Yoweri K. Museveni
President of Uganda