世界发展银行-Uganda-Economic-Update,-17th-Edition,-June-2021---From-Crisis-to-Green-Resilient-Growth-_ndash_-Investing-in-Sustainable-Land-Management-and-Climate-Smart-Agriculture_96页_20mb

Uganda Economic Update Summary (17th Edition, June 2021)

Core Content

This document presents the Seventeenth Uganda Economic Update, which outlines the economic situation in Uganda as it emerges from the impacts of the COVID-19 pandemic, while emphasizing the need for a green and resilient recovery. The report highlights the critical link between natural resource management, climate-smart agriculture (CSA), and economic growth, as well as the challenges and opportunities for sustainable development in the context of rising economic and environmental vulnerabilities.

Main Points

1. Current Economic Situation

• Economic Contraction and Recovery: Uganda's economy contracted sharply in 2020 due to the pandemic, with real GDP falling by 1.1 percent. A modest recovery of 0.7 percent occurred in the first half of FY21, with growth expected to rise above 3 percent in FY21.
• Sectoral Impact: The services sector was the hardest hit, with a contraction of over 3 percent in 2020. Manufacturing and construction showed signs of recovery in the latter half of FY21.
• Labor Market and Poverty: The pandemic has increased inequalities and poverty, with many people returning to agriculture due to job losses. Poverty is projected to rise by 2.6 million in the short term.
• Formal Sector Challenges: Despite liquidity support, the formal business sector has not seen significant benefits. Lending rates remain high and volatile, while private sector credit growth is limited to a few sectors like telecommunications.

2. Fiscal and Monetary Policy

• Fiscal Deficit: The fiscal deficit is expected to widen to 9.9 percent of GDP by end FY21, from 7.1 percent in FY20 and 4.9 percent in FY19.
• Government Borrowing: To finance the current account deficit, government borrowing has increased to 7.3 percent of GDP in the first half of FY21.
• Monetary Policy: The Bank of Uganda has maintained an easy monetary policy to curb inflationary pressures, with low interest rates and liquidity support.
• Macro-Prudential Risks: Non-performing assets in the banking system have doubled to 10 percent in the latter part of FY20, raising concerns about financial stability.

3. Trade and Investment

• FDI: Foreign direct investment remains low at 2 percent of GDP, with non-debt creating flows financing 20 percent of the current account deficit.
• Exports and Imports: Merchandise exports rebounded to US$1.2 billion in the first half of FY21, mainly due to gold exports, but imports surged to US$4.7 billion, worsening the current account deficit.
• Tourism and Remittances: The return of tourism inflows and remittances has been sluggish, affecting economic recovery.

4. Debt and Liquidity Risks

• Public Debt: Public debt is expected to exceed 50 percent of GDP by FY22 due to increased borrowing and non-concessional loans.
• Debt Sustainability: The debt sustainability analysis highlights the risks of escalating debt and the need for fiscal discipline and debt management.

5. Natural Capital and Environmental Challenges

• Land Degradation: 41 percent of Uganda's land is now degraded, with soil erosion costing about 17 percent of GDP.
• Forest Loss: Forest cover is declining at 2.6 percent annually, one of the highest rates globally.
• Climate Risks: Climate shocks, including extreme weather events and slow-onset changes, are exacerbating natural capital degradation, increasing economic vulnerability and poverty.

6. Key Recommendations

a. Post-Recovery Macroeconomic Management

• Fiscal Prudence: Transparent and prudent fiscal management is essential to support recovery and resilient growth.
• Balancing Risks: Authorities must balance debt risks with economic slowdowns from fiscal tightening.
• Fiscal Consolidation: Revenues should be increased through tax reform and budget re-prioritization, shifting focus from security and public administration to human capital development and green investments.
• Institutional Strengthening: Strengthening the institutional framework for fiscal policy and revising fiscal rules is necessary.

b. Monetary and Macro-Prudential Policies

• Coordination: Close coordination between monetary, fiscal, and financial policies is needed to maintain internal balances and avoid inflation.
• Banking Sector Resilience: Upstream reforms to insolvency and debt resolution frameworks are required to manage non-performing loans and ensure financial stability.
• Balance Sheet Transparency: Enhancing balance sheet transparency and phasing out distortive liquidity support measures is crucial.

c. Longer-Term Policy Actions

• Social Protection: Expanding social safety nets to support equity and inclusion and cushion households from food insecurity and poverty.
• Education Recovery: Strengthening the education response by closing learning gaps and proactively re-enrolling children who dropped out.
• Digital Agenda: Developing a robust digital agenda to support education, business, and financial systems.
• Agricultural Productivity: Boosting agricultural productivity through climate-smart practices and sustainable land management to reduce poverty and enhance resilience.

Key Information

• The economic recovery is modest and uncertain, with downside risks.
• Climate change and natural resource degradation are major challenges for economic growth and poverty reduction.
• Social safety nets and education reforms are critical for long-term development.
• Green investments and sustainable practices are necessary for a resilient and inclusive growth path.
• Debt management and fiscal discipline are essential to avoid long-term economic instability.

Conclusion

The report underscores the urgent need for integrated policy approaches that address both economic recovery and environmental sustainability. It calls for greater coordination between fiscal, monetary, and financial policies, along with investments in green and resilient pathways to ensure inclusive and sustainable development in Uganda.