IMF Revises Uganda’s Growth Prospects

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The International Monetary Fund’s World Economic Outlook for April projects global growth to persist but at a slow pace, leaving the world economy more exposed to risk.

In the report released on Tuesday, global growth is forecast at 3.2% in 2016 and 3.5% in 2017, a downward revision of 0.2% and 0.1% respectively, compared with the January update. This unfavourable global prospect will have a negative impact on many African and low-income countries – Uganda inclusive, with a slowdown in capital flows.

While emerging markets and developing economies will still account for the lion’s share of world growth in 2016, prospects across countries remain uneven and generally weaker than over the past two decades.

This follows the World Bank’s statement on Monday, in which Sub-Saharan Africa’s growth was lowered from, 4.4 percent to 3.3 percent

In the IMF Economic Outlook, Uganda’s growth is forecast at 5.3 percent and 5.7 percent for 2016 and 2017 respectively, up from 5 percent for 2015.The Ministry of Finance projects a 5.8 percent growth by end of the current fiscal year in June.

Several infrastructure projects are currently undergoing in Uganda, including an oil refinery, highways and a power dam. A cut in the central bank lending rate is expected to encourage private sector borrowing.

In other East African economies, Tanzania has the highest projected growth rate for 2016 at 6.9 percent, whereas Kenya is projected to grow at 6 percent, an improvement from 5.6 percent from last year.

Oil exporting economies – Nigeria and Angola – will experience slow growth due to oil price decline.

Emerging & developing economies still lead global growth at 4.1% expected this year, 4.6% next. #WEO pic.twitter.com/q4jPhk1VY5

— IMF (@IMFNews) April 12, 2016

In a recent speech, IMF Managing Director Christine Lagarde warned that the global recovery remains too slow, too fragile, with the risk that persistent low growth can have damaging effects on the social and political fabric of many countries.

“Lower growth means less room for error,” said Maurice Obstfeld, IMF Economic Counsellor and Director of Research. “Persistent slow growth has scarring effects that themselves reduce potential output and with it, demand and investment,” he added.

The IMF proposed aggressive policy actions to enhance demand and supply potential.

In many emerging market and developing economies, monetary policy must grapple with the impact of weaker currencies on inflation and private sector balance sheets. Exchange rate flexibility, where feasible, should be used to cushion the impact of terms of trade shocks.

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