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Uganda Country Risk Report Q1 2016

Uganda Country Risk Report Q1 2016

Core Views

An ambitious infrastructure spending programme and a failure to rein in recurrent spending will, despite improvements in revenue collection, see Uganda’s fiscal balance remain deep in the red over the coming years.

Upside inflationary risks and a vulnerable shilling will see the Bank of Uganda keep monetary conditions tight through H116, with increasing consequences for the real economy.

The inter-related factors of elevated inflation, FX weakness and higher interest rates will dampen economic activity in Uganda in 2016 and keep economic output below potential. We have revised down our prediction for growth next year to 5.0%, from 5.7%.

Although President Yoweri Museveni will face little meaningful competition at next February’s general election, his efforts to mobilise a disenfranchised electorate and maintain support in his increasingly divided party will be costly and distracting. The president’s popularity and political capital has diminished significantly in recent years, but his grip on power remains firm.


Executive Summary
Core Views
Key Risks
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Emergent Opposition Challenge Too Early For 2016 Polls
Efforts to unite Uganda's fractious opposition are progressing, but time, history and the power of incumbency are against them.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Political Challenges For Museveni Ahead
Uganda will face several challenges over the coming decade, including a presidential succession as well as the need to overcome
the legacy of civil war in the north and create jobs for its youthful population. That said, we maintain a positive outlook on Uganda and
foresee a relatively successful resolution of these challenges.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Inflation And Tight Monetary Conditions To Dent 2016 Growth
The inter-related factors of elevated inflation, FX weakness and higher interest rates will dampen economic activity in Uganda in 2016
and keep economic output below potential. We have revised down our prediction for growth next year to 5.0% from 5.7%.
TABLE: ECONOMIC ACTIVITY
GDP By Expenditure Outlook
Monetary Policy
Impact Of Monetary Tightening To Be Felt In 2016
Upside inflationary risks and a vulnerable shilling will see the Bank of Uganda keep monetary conditions tight through H116, with
increasing consequences for the real economy.
TABLE: MONETARY POLICY
Fiscal Policy And Public Debt Outlook
Budgetary Pressures To Remain Heightened In 2016
An ambitious infrastructure spending programme and a failure to rein in recurrent spending will, despite improvements in revenue
collection, see Uganda's fiscal balance remain deep in the red over the coming years.
TABLE: FISCAL POLICY
Banking Sector Update
Tighter Monetary Conditions Will Dent, But Not Derail Banks' Performance
Despite tighter monetary conditions, asset and loan growth will be relatively resilient over the coming quarters owing to strengthening
economic conditions and a weak monetary policy transmission mechanism that will lessen the impact of the hikes.
Chapter 3: 10-Year Forecast
The Ugandan Economy To 2024
A Decade Of Promise, But Also Of Risk
We are forecasting robust real GDP growth averaging more than 6.2 % over our 10-year forecast period as private consumption and
agricultural exports continue to grow; the country starts producing oil; and electricity generation increases, which together have the
potential to stimulate non-agricultural sectors and reduce the country's energy import bill.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Education
TABLE: SUB-SAHARAN AFRICA - EDUCATION RISK
Government Intervention
TABLE: SUB-SAHARAN AFRICA - GOVERNMENT INTERVENTION RISK
Chapter 5:BMI Global Macro Outlook
Global Outlook
Exit The Dragon
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %

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