Uganda’s economic recovery has slowed down due to a surge in COVID-19 cases in the East African country, its central bank said.
Bank of Uganda (BOU) said in a statement issued late on Monday that since December 2020, the recovery has lost momentum.
According to the statement, high-frequency indicators of economic recovery show a growth of about 2.6 percent in the quarter to December 2020, down from a growth of 9.2 percent in the quarter to September 2020.
BOU Business Confidence Index and the Purchasing Managers’ Index indicate that business conditions deteriorated in the quarter to January 2021, after improving in the quarter to October 2020.
According to scientists, the increase in Uganda’s COVID-19 cases is attributed to the electioneering process that the country was going through months to the Jan. 14 presidential and parliamentary elections.
New figures from the ministry of health show that as of Feb. 13, the country had 40,055 cases of COVID-19, 14,486 recoveries and 328 deaths since the first case was registered on March 21, 2020. From September-December 2020, the cases increased by 88 percent.
BOU said that although the recovery has slowed down, it is better than the sharp contractions of 6 percent and 2.2 percent in the quarter to June 2020 and September 2020 respectively.
The statement said the medium-term outlook continues to be highly conditional on the timelines of the world-wide vaccine rollout and the course of the virus and its new variants.
The bank projects that as the vaccine becomes readily available in Uganda and the spread of the pandemic is controlled, tourism is expected to rebound in addition to exports increasing from strengthened foreign demand.
This projected recovery is expected to lead to a 3.0-3.5 percent growth this financial year 2020/21. The growth will increase to 4.0-4.5 percent and 6.0-7.0 percent in the financial year 2021/22, and in outer years, respectively.
Early this month, the government approved the purchase of 18 million doses of AstraZeneca vaccine from the Serum Institute of India. The vaccine doses are expected in the country next month.
The bank said whereas advanced economies are expecting a rapid vaccine-fueled recovery, the damaging effects of the pandemic could persist in less developed economies that may not receive the vaccines quickly. The bank cited the case of Uganda’s exports that largely target the Common Market for Eastern and Southern Africa region, where the vaccine rollout is likely to be sluggish.
This effect could be detrimental to domestic economic growth recovery in the medium and long term, according to the bank.
While the impact of COVID-19 is expected to wane in the financial year 2023/24, the adverse impact of the pandemic on potential GDP growth could be more profound if it turns out to be longer or harsher than it is currently assumed, the central bank said.
The statement said adverse weather-related shocks, feeble private sector credit growth among others pose significant downside risks to the domestic economic growth outlook.
On the upside, the bank said economic activity could be stronger than is currently projected if COVID-19 scarring effects become more limited in scope.
“A successful and faster rollout of mass vaccination globally could allow quicker unwinding of social distancing measures and result in more robust increase in economic activity,” the statement said.