President Yoweri Museveni heads the National Resistance Movement (NRM), a grass roots entity that has dominated politics since its inception. The international community (including key donors) sometimes criticise Museveni’s record in relation to extension of his period in office and perceptions of corruption within the country, but is likely to remain supportive. Military action against the Lord’s Resistance Army (LRA) in the north of the country has directed resources away from other productive uses. Regional relations centre on the East African Community (EAC). General elections are scheduled for February 2016.
Average annual GDP growth in the ten-years up to end-2014 was strong at +6.7%, resulting in a marked reduction in poverty levels, although the starting point was very low. Agriculture remains the cornerstone of the economy, accounting for around 23% of GDP. Coffee is the principal crop and generator of export receipts (around 20% of the total). However, the discovery of oil in the Lake Albert region to the west is transforming the economy. Although commercial production is not expected before 2017-18 (or later), investment in the energy sector is already driving GDP growth; annual GDP expansion is forecast at over +5% in 2015-17. The oil reserves are considered to be some of the largest discovered in the Sub-Saharan Africa region. It remains to be seen if the “resource curse”, evident elsewhere in Africa, will be avoided. Meanwhile, the government has to manage high expectations associated with nascent oil wealth.
External deficits and debt
The current account records large deficits (see chart) and we forecast a shortfall of -9% of GDP in 2015 and -10% in 2016. Deficits of such magnitude partly reflect large capital imports for investment in the oil and hydro-electricity sectors. Extenal debt ratios are low but again increasing (see chart).
Challenging business environment
The business environment is below average of the countries we assess. The Heritage Foundation’s Index of Economic Freedom (IEF) indicates that business is particularly hampered by regulatory problems (including perceptions of corruption and inefficient government services) and insufficient property rights (including a judicial system that is not independent). The 2015 IEF ranks Uganda 92 out of 178 countries, below Morocco but above Namibia and Lebanon. The World Bank’s Doing Business 2016 report ranks Uganda 122 out of 189 economies for the overall ease of doing business, below Iran and Argentina but above Egypt.