Kampala — THE national economy is experiencing a slowdown due to a decline of output in the agricultural and industrial sector, according to a report presented to Parliament on Thursday.

The economy is expected to suffer more strain as the spillover effects of the global economy meltdown and credit squeeze in rich countries' financial markets begins to bite.

The gloomy picture was painted by the "Report of the Analysis of the Performance of the Economy for the Financial year 2007/2008." It was presented by Butambala MP Lubega Kaddunabbi, who chairs the national economy committee.

Kaddunabbi said while there was an increase in the Gross Domestic Product (GDP) now at 8.9%, from 7.4% in 2006/07, key sectors had stagnated.

"The high rate was largely driven by remarkable growth rates registered in the services sector which surged to 13.0% in the reporting period compared to 8.8% the previous fiscal year," he said, naming trade, transport, communications, hotels and financial services as key drivers.

"There was, however, a marked slow down in the agriculture sector and in particular the fishing sub-sector which registered a negative growth of -12.4% compared to -3.0% the previous year," he explained.

The committee pointed out that the rate at which fish stocks are being depleted, through use of illegal and crude fishing methods, should worry the nation.

The Government, the committee urged, should urgently put in place measures to protect the resource in a sustainable way.

"The growth slowdown spread to the industrial sector, which recorded a growth rate of 6.4% compared to 9.9% in the last financial year. The deceleration in this sector was attributable to a profound decline in mining and quarrying which dropped to 0.8% from 19.5% the previous year," the report says. "However, it is expected that this sector will pull up with the anticipated extraction of oil reserves in the Albertine region. On the other hand, modest growth rates were registered in the manufacturing, electricity and construction sub-sectors."

Giving the general outlook of the economy and the creeping in of the global economic turn down, the report contrasts the finance minister's assertion that the economy was robust and the international financial squeeze would not affect the nation.

In October, Dr. Ezra Suruma said the economy was insulated, but the report said it was not. Pointing out the rising global oil, food and commodity prices and the international credit squeeze and housing sector distress, the committee argued that there were no guarantees that the country would escape the pinch. "Pressures might mainly emanate from terms of trade losses, the impact of strong currencies on trade and tightening credit conditions. The Government must put in place policies to address the existing supply side constraints in order to quickly stimulate both production and productivity."

It said although Uganda did not have asset backed securities, there would be an impact on foreign aid, remittances from kyeyo and on foreign direct investments.