Boston, MA -- (ReleaseWire) -- 12/24/2013 -- Ugandan economy rebounded strongly in 2013 and we expect this positive momentum to continue over the coming quarters. Even so, the deleterious effects of the recent drought on inflation and household income growth have dampened our outlook.
We expect inflation in Uganda to head higher over the coming months due to the effect of drought-induced food price pressures. While these pressures should ease through H114, we believe that the Bank of Uganda will maintain a hawkish stance.
President Yoweri Museveni and his ruling National Resistance Movement Party (NRM) face a tough year ahead. Across the political spectrum, frustration and anger at the government has been building of late and shows no sign of abating.
Major Forecast changes
Recent developments have prompted us to lower our growth pro -jections and we now expect real GDP growth in 2014 to come in at around 6.5%, compared to 7.6% before.
Recently published balance of payments data by the Bank of Uganda have prompted us to adjust our forecasts for the country's current account deficit. We are now predicting a shortfall equal to 7.6% of GDP in 2014 compared to our previous estimate of 8.8%.
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Key risks to outlook
Weather always poses risks to our outlook, as the Ugandan economy is heavily reliant on agriculture. Adverse weather conditions could seriously hamper economic output and stoke inflationary pressures, while favourable weather could boost productivity.
If there are further delays to oil production - currently scheduled to begin in 2017 - or if the industry moves more quickly than we antici -pate, we would adjust our medium-to-long term forecasts accordingly.
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