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Budget Presentation FS 2013/2014 economic overview

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Budget Presentation FS 2013/2014 economic overview

  1. 1. FS 2013/2014 Budget - Uganda Economic Overview and Outlook DELOITTE June 14, 2013
  2. 2. Outline • Output Growth – Mission Accomplished? • Market Stability – Policy Success or Good Luck? • Policy Proposals – How do they buttress the strategic intentions? • The Rest of the World – A Fly in the Soup? • Outlook
  3. 3. Output Growth – Mission Accomplished? • 2012/13: Theme – “Priorities for Renewed Economic Growth and Development”. • 2013/14: Theme – “The Journey Continues: Towards Socio- Economic Transformation for Uganda”. • Sovereign Rating – Standard and Poor’s B+; a higher rating when major economies are facing downgrades. 7.3 5.9 6.6 3.4 5.1 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2008/09 2009/10 2010/11 2011/12 2013/13 Source: MOFPED - BTTB 2013/14 Overall Real Growth %)
  4. 4. Output Growth – Mission Accomplished? • The real growth improvement described as ‘significant’. Is this the best that could have happed? – There was the “small’ matter of donor suspension of budgetary support, equivalent to 1.3% of GDP; – Then there lagged effect of the tight monetary policy of 20011/12 that affected growth via depended credit expansion; a correct policy decision given that the trade-off is short-term and the benefits is stability surpasses the cost of output. • It matters that the neighbours are also on a recovery path. 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 2009 2010 2011 2012 2013 Source: IMF World Economic Outlook, April 2013 Real Output Growth (%) Burundi Kenya Rwanda Tanzania
  5. 5. Market Stability – Policy Success or Good Luck? 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 Jan-07 Aug-07 Mar-08 Oct-08 May-09 Dec-09 Jul-10 Feb-11 Sep-11 Apr-12 Nov-12 Source: UBOS Annual Inflation (%) Core Inflation (%) Headline Inflation (%) 5.0 7.0 9.0 11.0 13.0 15.0 17.0 19.0 21.0 23.0 25.0 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Source: BOU Central Bank Rate (%)
  6. 6. Market Stability – Policy Success or Good Luck? 0.0 10.0 20.0 30.0 40.0 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Annual Inflation (%) Core Inflation (%) Headline Inflation (%) -40.0 -20.0 0.0 20.0 40.0 60.0 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 CPI Decomposition Food Crops (%) Elec, Fuel & Utilities (EFU) - %
  7. 7. Market Stability – Policy Success or Good Luck? y = 0.293x + 7.048 R² = 0.472 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 HeadlineInflation Food Crop Price Changes Association of Headline Inflation Food Crop Price Change (%)
  8. 8. Market Stability – Policy Success or Good Luck? 1,500.00 1,700.00 1,900.00 2,100.00 2,300.00 2,500.00 2,700.00 2,900.00 3,100.00 1-Sep-05 1-May-06 1-Jan-07 1-Sep-07 1-May-08 1-Jan-09 1-Sep-09 1-May-10 1-Jan-11 1-Sep-11 1-May-12 1-Jan-13 Nominal Exchange Rate (US$/UGX) -14.00 -12.00 -10.00 -8.00 -6.00 -4.00 -2.00 0.00 2.00 2005 2006 2007 2008 2009 2010 2011 2012 Current Acount Balance (% of GDP) Source: BOU
  9. 9. Policy Proposals • Investment in infrastructure; • Supporting increased agriculture production and productivity; • Promoting innovation for Industrialization and private sector competitiveness; • Quality and Access of social services – water, health, education; • Fighting corruption in public service delivery.
  10. 10. Policy Proposals – (a) it matters who gets the finance - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Outstanding Credit by the Banking Industry – Private sector (UGX M) Agriculture Mining and Quarrying Manufacturing Trade Transport and Communication Electricity and Water Building, Mortgage, Constructio n and Real Estate Personal Loans and Household Loans Source: BOU
  11. 11. Policy Proposals – (a) it matters who gets the finance - 5.0 10.0 15.0 20.0 25.0 30.0 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Share of Private Sector Credit (%) Agriculture Mining and Quarrying Manufacturing Trade Transport and Communication Electricity and Water Building, Mortgage, Constructio n and Real Estate Personal Loans and Household Loans Source: BOU
  12. 12. Policy Proposal – (b) Will the new Public Debt Strategy Help Align Resource Allocation? • At less than 30% of GDP, there is scope for careful increase 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 priority sectors? • When (if) the EAC Monetary Union come to effect, what will be its implication on domestic debt?
  13. 13. The Rest of the World – A Fly in the Soup? • The Eurozone never fails to disappoint: Iceland-PIGS-Cyprus. – The Euro arrangement “feels like a loveless marriage where the cost of breaking up is the only thing that keeps the partners together” – The Economist, March 23rd – 29th 2013. • The emerging markets that drove the world economy during the epitome of the global economic meltdown have now joined the fray. – China is slowing down, and justifiably so, given that “Growing faster is a poor alternative to growing up” – The Economist, April 20th – 26th , 2013. – The economy of one of the emerging giants is being described as “Brazil’s Mediocre Economy” – this week’s issue of The Economist
  14. 14. Outlook • Real growth has assumed the right trajectory; • The growth projections of 6.0% by 2013/14; then 6.9% in 2014/15, and subsequently 7.0% looks attainable: – They should nonetheless be seen as the best-case scenario that needs to be tempered with the downside risks, both local and international.
  15. 15. Thank You!

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