Ugandan economic growth will recover in 2017 and 2018 after slowing sharply in 2016. The recovery will be driven by improved weather conditions, boosting agricultural production, while government capital spending and private sector investment will also provide positive momentum.
The government will not meet ambitious capital spending targets outlined in the FY17/18 budget and we therefore expect the budget deficit to come in below the government's expectations. Debt will continue to rise as a proportion of GDP but will remain at sustainable levels for the foreseeable future.
Although we believe that inflation will continue to decline over coming months, the Bank of Uganda has likely reached the end of its easing cycle given low real yields and little pass through from cuts already made to commercial bank lending rates. We are forecasting that the policy rate will remain at its current level of 10.00% for the remainder of 2017 and through to 2018.
An alleged plan to remove presidential age limits in Uganda is likely to be approved by parliament, despite apparent obstacles. This will likely lead to protests from Ugandans opposed to his continued rule and will heighten risks of instability when Yoweri Museveni eventually leaves power due to the lack of a succession plan.