Outline• Output Growth – Mission Accomplished?• Market Stability – Policy Success or Good Luck?• Policy Proposals – How do they buttress the strategicintentions?• The Rest of the World – A Fly in the Soup?• Outlook
Output Growth – Mission Accomplished?• 2012/13: Theme – “Priorities for Renewed EconomicGrowth and Development”.• 2013/14: Theme – “The Journey Continues: Towards Socio-Economic Transformation for Uganda”.• Sovereign Rating – Standard and Poor’s B+; a higher ratingwhen major economies are facing downgrades.18.104.22.168.45.10.01.02.03.04.05.06.07.08.02008/09 2009/10 2010/11 2011/12 2013/13Source: MOFPED - BTTB 2013/14Overall Real Growth %)
Output Growth – Mission Accomplished?• The real growth improvement described as ‘significant’. Is this the best thatcould have happed?– There was the “small’ matter of donor suspension of budgetarysupport, equivalent to 1.3% of GDP;– Then there lagged effect of the tight monetary policy of 20011/12 thataffected growth via depended credit expansion; a correct policy decisiongiven that the trade-off is short-term and the benefits is stability surpassesthe cost of output.• It matters that the neighbours are also on a recovery path.0.01.02.03.04.05.06.07.08.09.02009 2010 2011 2012 2013Source: IMF World Economic Outlook, April 2013Real Output Growth (%)BurundiKenyaRwandaTanzania
Market Stability – Policy Success or Good Luck?0.05.010.015.020.025.030.035.0Jan-07Aug-07Mar-08Oct-08May-09Dec-09Jul-10Feb-11Sep-11Apr-12Nov-12Source: UBOSAnnual Inflation (%)Core Inflation (%) Headline Inflation (%)5.07.09.011.013.015.017.019.021.023.025.0Jul-11Sep-11Nov-11Jan-12Mar-12May-12Jul-12Sep-12Nov-12Jan-13Mar-13May-13Source: BOUCentral Bank Rate (%)
Market Stability – Policy Success or Good Luck?1,500.001,700.001,900.002,100.002,300.002,500.002,700.002,900.003,100.001-Sep-051-May-061-Jan-071-Sep-071-May-081-Jan-091-Sep-091-May-101-Jan-111-Sep-111-May-121-Jan-13Nominal Exchange Rate (US$/UGX)-14.00-12.00-10.00-8.00-6.00-4.00-2.000.002.002005 2006 2007 2008 2009 2010 2011 2012Current Acount Balance (% of GDP)Source: BOU
Policy Proposals• Investment in infrastructure;• Supporting increasedagriculture production andproductivity;• Promoting innovation forIndustrialization and privatesector competitiveness;• Quality and Access of socialservices –water, health, education;• Fighting corruption in publicservice delivery.
Policy Proposals – (a) it matters who gets the finance-200,000400,000600,000800,0001,000,0001,200,0001,400,0001,600,0001,800,0002,000,000 Jun-07Nov-07Apr-08Sep-08Feb-09Jul-09Dec-09May-10Oct-10Mar-11Aug-11Jan-12Jun-12Nov-12Apr-13Outstanding Credit by the Banking Industry – Private sector (UGX M)AgricultureMining and QuarryingManufacturingTradeTransport and CommunicationElectricity and WaterBuilding, Mortgage, Construction and Real EstatePersonal Loans and HouseholdLoansSource: BOU
Policy Proposals – (a) it matters who gets the finance-5.010.015.020.025.030.0Jun-07Nov-07Apr-08Sep-08Feb-09Jul-09Dec-09May-10Oct-10Mar-11Aug-11Jan-12Jun-12Nov-12Apr-13Share of Private Sector Credit (%)AgricultureMining and QuarryingManufacturingTradeTransport and CommunicationElectricity and WaterBuilding, Mortgage, Construction and Real EstatePersonal Loans and HouseholdLoansSource: BOU
Policy Proposal – (b) Will the new Public DebtStrategy Help Align Resource Allocation?• At less than 30% of GDP, there is scope for carefulincrease in levels of debt:– Economy is debt sustainable; no risk of debt distress– Will the rating be put to use soon?– Will domestic borrowing allocate more credit to prioritysectors?• When (if) the EAC Monetary Union come toeffect, what will be its implication on domestic debt?
The Rest of the World – A Fly in the Soup?• The Eurozone never fails to disappoint:Iceland-PIGS-Cyprus.– The Euro arrangement “feels like aloveless marriage where the cost ofbreaking up is the only thing that keepsthe partners together” – TheEconomist, March 23rd – 29th 2013.• The emerging markets that drove theworld economy during the epitome ofthe global economic meltdown havenow joined the fray.– China is slowing down, and justifiablyso, given that “Growing faster is a pooralternative to growing up” – TheEconomist, April 20th – 26th , 2013.– The economy of one of the emerginggiants is being described as “Brazil’sMediocre Economy” – this week’s issueof The Economist
Outlook• Real growth has assumed the right trajectory;• The growth projections of 6.0% by 2013/14; then6.9% in 2014/15, and subsequently 7.0% looksattainable:– They should nonetheless be seen as the best-case scenariothat needs to be tempered with the downside risks, bothlocal and international.