Boston, MA -- (ReleaseWire) -- 12/24/2013 -- 2012 was a tough year for the Ugandan construction market, which was badly affected by high interest rates, limiting real GDP growth to an estimated 2.8%. However, interest rates have been progressively eased and Uganda's economic performance has recovered, with real growth of 6.2% and 7.6% anticipated for 2013 and 2014 respectively. Major projects in the infrastructure sector are moving forwards, including the 600-megawatt Karuma power project and the Hoima refinery, which are guiding our positive outlook of the sector for the next few years. We forecast that real growth will reach 6.7% in 2013, climbing to 9.9% in 2014 and averaging 6.9% to the end of our forecast period in 2022.
The key developments in the sector over the last quarter:
- There are upside risks to our core forecast scenario, which suggest that Uganda's economic recovery is gathering steam and becoming broader-based. In particular, private sector credit growth, which has been subdued in recent quarters, posted its fourth successive monthly increase in October 2013. With regard to downside risks, Uganda will face several challenges over our 10-year forecast period, including popular unrest related to one-party rule, the need to overcome the legacy of civil war in the North and a lack of jobs for its youthful population. Despite this, we maintain a cautiously positive outlook on Uganda.
- The government has pledged to tackle power shortages in the country and has presented a long list of renewable power stations that have been lined up for construction. That said, we note that risks remain prominent, with corruption likely to delay efforts. Reliance on hydropower will increase the country's exposure to weather conditions.
- South African firm Sanlam is planning to invest US$190mn in Uganda's real estate sector.
- With the request for pre-qualifications for the construction tender of the Hoima refinery announced by the Ugandan government in early October, our view that the country's nascent oil sector should yield major infrastructure opportunities is beginning to play out.
- BMI's Oil & Gas team believes that the granting of licenses to China National Offshore Oil Corporation will see Uganda's upstream sector take off. This presents upside to our construction industry forecasts as not only will the oil sector need peripheral infrastructure in the midstream and downstream sectors, but also oil revenues for the Ugandan government are likely to be plied into the infrastructure sector.
- The government has announced a US$400mn project to expand and modernise Entebbe International Airport, along with a number of other transport upgrade projects.
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