世界发展银行-Uganda-Economic-Update,-14th-Edition,-February-2020-_-Strengthening-Social-Protection-to-Reduce-Vulnerability-and-Promote-Inclusive-Growth_43页_5mb

Uganda Economic Update Summary (14th Edition, February 2020)

Core Content

The Fourteenth Uganda Economic Update focuses on the importance of strengthening social protection systems to reduce vulnerability and promote inclusive growth. It provides an overview of the current state of Uganda's economy, outlines the macroeconomic outlook, and presents policy recommendations aimed at improving social protection coverage and effectiveness.

Main Economic Developments

1.1 Global Growth Weakening

• Global growth for 2019 was downgraded to 2.6%, 0.3% below previous forecasts.
• The slowdown is attributed to weaker-than-expected international trade and investment, with tariff increases and retaliatory actions affecting these areas.
• The U.S. growth is expected to slow to 2.5% in 2019, then 1.7% and 1.6% in 2020 and 2021, respectively.
• The Euro area has seen a rapid deterioration in economic conditions since mid-2018, with growth slowing from 1.8% in 2018 to 1.2% in 2019, and expected to rise slightly to 1.4% in 2020-21.

1.2 Sub-Saharan Africa Recovery Disappointing

• Economic recovery in Sub-Saharan Africa (SSA) has been disappointing, with lower-than-expected growth.
• Despite some improvements, the region continues to face external shocks, climate risks, and political instability.

1.3 Uganda's Growth Momentum Sustained

• Uganda's real GDP growth in FY18/19 was 6.5%, maintaining the rebound in economic activity over the last two years.
• This growth was driven by domestic consumption and sustained public and private investments.
• Net FDI inflows increased to 5.1% of GDP, up from 3% in the previous year.

1.4 Inflationary Pressures Subdued

• Inflation remains below the BoU's target of 5%.
• Headline inflation fluctuates with seasonal changes, but agricultural performance keeps inflationary pressures low.
• The BoU reduced the policy rate to 9% in October 2019 to support lending rates and private sector credit growth.

1.5 Current Account Deficit Widened

• The current account deficit almost doubled to 9.8% of GDP in FY18/19 from 5.4% the previous year.
• It is financed by large net FDI inflows, making it manageable.

1.6 Fiscal Deficit Below Target

• The fiscal deficit in FY18/19 was 4.9% of GDP, below the budgeted target of 5.8%.
• This is due to slow capital spending and higher-than-expected tax revenues.
• Tax revenues reached 12.6% of GDP, exceeding the budget target of 12.4%, but still below the medium-term target of 16% and regional peers like Kenya (17.9%) and Rwanda (16.3%).

Economic Outlook and Risks

2.1 Broadly Favorable Outlook

• The economic outlook is positive, supported by consumption spending and sustained investments in infrastructure, industrialization, electricity, and oil extraction.
• GDP growth of 6% or more is expected in the medium-term.

2.2 Risks Tilted to the Downside

• Risks include political uncertainty ahead of the 2021 elections, which could lead to increased spending and reduced investment.
• Rain-fed agriculture and systemic challenges in the sector remain a risk to GDP growth, poor income, and export earnings.
• Regional and global factors such as trade uncertainties between the U.S. and China could further slow global growth.

2.3 Policy Actions for Stability and Inclusive Growth

• Enhance domestic revenue mobilization by establishing a Tax Expenditure Governance Framework.
• Address implementation challenges for public investments and manage public assets to preserve value and maximize returns.
• Strengthen public debt management and transparency, including monitoring fiscal risks and contingent liabilities.

Strengthening Social Protection

3.1 Role of Social Protection in Inclusive Growth

• Social protection programs are critical for reducing vulnerability and supporting economic growth.
• They help households recover from shocks, sustain human capital, and avoid critical asset sales or withdrawal from education.

3.2 Current State of Social Protection

• Direct income support programs in Uganda have low coverage, reaching only 3% of the population.
• In Kenya, direct income support reaches 6% of the population.
• Financing for social protection is limited, with a large portion coming from donor grants and concessional loans.

3.3 Expanding Social Protection

• Social protection should be expanded to support human capital investments and mitigate shocks.
• Targeting should focus on the poorest and most vulnerable in high-risk areas.
• Disaster Risk Financing (DRF) should be expanded, using regional and local examples like Kenya and NUSAF 3.

3.4 Key Recommendations

• Expand direct income support to help with human capital investment and shock mitigation.
• Scale up existing DRF pilots to better prepare for droughts and other shocks.
• Focus social protection expansion on the poor and vulnerable in geographically neediest areas.
• Scale up agricultural insurance due to drought risks and vulnerability of agricultural households.
• Provide fiscal incentives to encourage voluntary savings among informal sector workers.

Key Information

• Real GDP growth (FY18/19): 6.5%
• Industry share in GDP: Increased from 20% to 30%
• Tax revenues (FY18/19): 12.6% of GDP
• Fiscal deficit (FY18/19): 4.9% of GDP
• Current account deficit (FY18/19): 9.8% of GDP
• Net FDI inflows (FY18/19): 5.1% of GDP
• New jobs needed annually: ~600,000 to accommodate youth leaving education
• Social protection coverage: Only 3% of the population, significantly lower than regional peers

Conclusion

Uganda's economy has shown impressive growth, but the growth rate is not sufficient to meet lower middle-income status and poverty reduction goals. Social protection is essential to reduce vulnerability, support inclusive growth, and sustain human capital. The report emphasizes the need for policy reforms, better targeting, and increased financing for social protection programs, especially in high-risk and vulnerable areas. It also highlights the importance of agricultural finance and insurance and fiscal incentives to encourage savings among informal workers.