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Mutebile: Global Trade Tensions Threaten Uganda’s Growth Projection

The Ugandan economy is projected to be operating around its potential economic growth of 6-6.5 percent but remained vulnerable to effect of global trade tensions, Chimp Corps report.

Bank of Uganda Governor Emmanuel Tumusiime-Mutebile on Monday said, “downward risks to the projected economic growth momentum have increased since the previous round of forecasts,” adding, “The risks largely revolve around unresolved trade tensions, which are affecting global and domestic trade and investment activities.”

Mutebile said elevated political and policy “uncertainty in the global economy in an environment of limited political space could weigh further on global growth and subsequently on Uganda’s economic growth.”

The International Monetary Fund (IMF) recently warned that intensifying trade tensions such as U.S.-China tariff contestations and the uncertainty over Brexit could result in weaker global growth and disrupt globally interconnected value chains.

Uganda is integrated into the global economy hence vulnerable to commodity prices, the volume and direction of international capital flows, and trade.

Issuing the Monetary Policy Statement for April 2019 in Kampala today, Mutebile, however, said the upturn in the Uganda economy since the beginning of 2017 is expected to continue, partly supported by accommodative monetary policy, higher growth in government consumption and investment, strong pick up in private investment and consumption and improved agricultural performance.

Mutebile said BoU’s April 2019 Monetary Policy Committee meeting decided to maintain the Central Bank Rate (CBR) at 10 percent.

“The current level of the CBR is consistent with the BoU policy stance of maintaining inflation around the target of 5 percent while supporting economic growth,” said Mutebile.

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He said BoU judges that keeping the stance of monetary policy unchanged at this MPC meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Inflation

The March 2019 Consumer Price Index (CPI) data released by UBOS indicated mixed inflation developments

On the one hand, annual headline inflation remained unchanged at 3.0 percent as in February 2019 while annual core inflation rose from 3.7 percent to 4.6 percent approaching the BoU’s medium term policy target of 5 percent.

Low headline inflation continues to be supported by low food crops inflation which declined to minus 9.9 percent on March 2019 from minus 4.4 percent in February 2019.

Energy Fuel and Utilities inflation also declined from 5.9 percent to 5.3 percent over the same period.

Mutebile said the risks to the outlook include the future direction of food crops prices in the wake of uncertain weather conditions; the strength of domestic aggregate demand and the path of the exchange rate, the latter being contingent on the external economic environment.

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