KAMPALA, June 27, 2024 — Economic activity in Uganda has remained resilient despite multiple successive shocks, with real gross domestic product (GDP) accelerating from 5.3% in FY22/23 to an estimated 6% in FY23/24, a new World Bank report notes. The expansion was driven by oil-related construction activity and the growth of the mining and quarrying sector, which benefited from sustained increases in gold prices and an improved domestic environment for artisanal mining.
According to the 23rd edition of the Uganda Economic Update (UEU) released today, low inflation and recovery of real income and employment bolstered consumption, while private investment remained resilient despite unfavorable domestic and global financial conditions. As a result, exports and manufacturing orders increased between August 2023 and May 2024. Per capita income reached about $980 in FY22/23, and continued growth will push Uganda closer to the lower-middle-income threshold.
The UEU, a twice-yearly analysis of Uganda’s near-term macroeconomic outlook, projects a positive picture with GDP growing to 6.2% in FY24/25 and accelerating to more than 7% in the medium term due primarily to investment in the oil and gas sector.
“In addition to continued investment in the oil sector, robust coffee and gold exports are expected to boost economic activity in the coming year,” said Rachel K. Sebudde, World Bank Senior Economist and lead author of the current Uganda Economic Update. “Meanwhile, the full implementation of the Parish Development Model and other public investment programs, along with improvements in infrastructure and a growing energy supply could further bolster aggregate demand. Over the medium term, oil exports will transform Uganda’s trade profile while the government’s efforts to promote tourism and agro-industrialization should help foster export diversification.”
There are risks that threaten Uganda’s growth trajectory. These include deteriorating global economic conditions due to rising geopolitical tensions that would reduce Uganda’s exports while distorting import supply chains; mounting inflationary pressures; prolonged monetary tightening that could constrain economic activity; delays in implementing major infrastructure projects; volatile foreign direct investment inflows; and diminished donor financing as the 2026 election approaches.
Going forward, Uganda needs stronger expenditure rules to lessen the impact of shocks and manage its transition to oil-exporter status while increasing social spending on health for equitable growth. This UEU focuses on improving public spending on health to build human capital. It notes that government spending on health is much less compared to peer countries in the region. Due to underspending on education, health, and social protection sectors, productivity among Uganda's future workforce is projected among the lowest worldwide. Households and external development partners finance a combined 85% of current total health spending. The share of government resources devoted to health spending has declined from 6.5% of total public spending in FY14/15 to 3.9% in FY20/21.
“Despite its low level of health spending per capita, Uganda utilizes its resources more efficiently than some peer countries,” said Mukami Kariuki, World Bank Country Manager for Uganda. “Uganda’s maternal health outcomes are better than those of most comparators; however this is not enough.” Kariuki emphasized that increased health spending combined with efficiency gains is necessary for building human capital.
The UEU recommends policymakers focus on increasing investments in primary healthcare; updating performance agreements with private facilities; improving investment climate within healthcare; enhancing workforce productivity within healthcare; reducing impoverishing health expenditures; improving quality care standards; promoting client engagement within healthcare service design.