PMI indicates Uganda will taste 6% GDP growth: Stanbic Bank

PMI indicates Uganda will taste 6% GDP growth: Stanbic Bank
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The private Stanbic Bank its Purchase Managers Index PMI for September predicts trade growth and regional security will supercharge the Ugandan economy, in two years pushing annual economic growth as high as 6%, as East Africa moves away from election years and civil wars in South Sudan and DR Congo.

The findings of the survey offer a glimmer of hope after Uganda’s central bank also said continued improvement in Ugandan Business conditions.

“There are strong signs that the Ugandan GDP will taste 6% growth in two years as trade growth picks up and public, private investments continue to come in,” said Jibran Qureshi Standard Bank’s regional economist for East Africa

He was on Wednesday announcing the results at a press briefing in Kampala.

“Even  though  the  headline  PMI  fell  to  53.8  from 54.1  in  August,  the  average  of  54.1  in  the  three months  to  September  was  still  higher  than  the average of 51.6 in the first half of the year. A strong performance  from  the  coffee  sector  has  supported growth,  however  the  recent armyworm  infestation could still pose as a threat to food crops prices and agricultural  productivity  towards  the  back  end  of the  year.  That  said,  a  gradual  improvement  in private  sector  credit  growth  should  bode  well  for domestic demand. ”

The Ugandan private sector is being encouraged to increase its appetite for credit in a bid to boost economic activity. In the recent monetary policy statement for October the Central Bank announced a further downward revision of the Central Bank Rate (CBR), the fifth in the past nine months. At just 9.5% the CBR now stands at its lowest level since the introduction of the CBR in 2011. The Governor Emmanuel Mutebile explained the reasoning behind the rate cut, “Given that annual  core inflation is forecast to remain around the  medium term  target  of  5% and  economic  activity  is  slowly  gaining momentum,  a  cautious  easing  of  monetary  policy  is  warranted  to  boost private  sector  credit  growth  and  to  strengthen  economic  growth.”

Analysing the performance of the various business sectors Stanbic monitors to conduct the PMI research, Jibran revealed, “The agriculture, industry, services and wholesale and retail sectors  continued  to  register  growth  of  output  and  new business  inflows  in  September. Meanwhile, construction output decreased as the sector saw no change in new orders.” Overall input costs however rose across each sector.

Looking at employment where workforce numbers increased on the back of new projects and heightened demand, Jibran noted “Overall job creation is a trend we have witnessed since the inception of the survey 16 months ago.”

Uganda, which mostly relies on coffee for its foreign exchange needs, is expected to begin crude oil production in 2020.

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