Following what seems as an improvement in the economy despite existing risks, Bank of Uganda yesterday pressed ahead with its policy of easing monetary policy stance reducing the Central Bank Rate from 13 per cent to 12 per cent to boost economic activities.
Presenting the monetary policy statement for the month of December 2016, the Governor Bank of Uganda, Mr Emmanuel Tumusiime Mutebile said: “Given that core inflation is forecast to remain around the medium term target of 5 per cent over the next 12 months, and in line with efforts to keep the domestic economic growth momentum, BoU believes that there is scope to continue easing monetary policy”.
Uganda’s economy has been experiencing shocks internally and externally, however, Mr Mutebile explained that the prevailing conditions indicate that the economy is improving although many people don’t feel it in their “pockets”; the results of expected rainfall will further boost the state of Uganda’s economy to inform the higher growth rate the central bank is talking about.
Mr Mutebile said the domestic economy is continuing to grow moderately, driven by public investment revealing that the Bank of Uganda’s composite indicator of economic activity improved in August and September, although growth slowed in October 2016.
However, he was quick to state that the outlook for private investment remains subdued, although measures of business sentiment remain above average.
Comparing the current Bank of Uganda’s monetary policy with the one in the previous months, Mr Mutebile said: “The overall economic outlook remains largely unchanged from the monetary policy statement of October 2016. The real GDP growth rate forecast remains around 5 per cent for 2016/17, 5.5 per cent for 2017/18 and 6.0 per cent for 2018/19”.
“There are downward risks to the projected path largely emanating from the uncertain global economic developments. The economies of some our trading partners are expected to grow at a slower rate than previously assessed, which will continue to weigh on Uganda’s exports,” he said.
Over the past one month, the shilling has registered sharp depreciation against the US dollar, a development which has seen volatilities in the foreign exchange market.
Mr Mutebile said the shilling has experienced sharp adjustments and significant volatility due to continuing uncertainties in the global economic and policy environment. “These factors could continue to cause volatility in the exchange rate,” he said.