"But on a whole 2014 looks brighter," Kaboyo said. Stephen Kaboyo
Ana Lucía Coronel, the IMF mission chief and senior resident representative for Uganda, was also positive about Uganda's economic growth and recovery saying it will continue to gain momentum mainly driven by public investment, supported by appropriate policies.
Coronel said with the recovery of private sector activity and significant public investment in the construction of two large hydropower plants and road projects, growth is expected to rise to over 6.2% in 2013/2014.
She added that BoU's monetary policy stance is likely to keep core inflation within the expected 5% medium-term target.
Coronel credits actions taken to improve public financial management practices, including the first phase of implementation of a treasury single account and the upgrading of key accounting systems. These measures will boost growth of Uganda's economy, she says, but only if fiscal discipline is maintained.
Progress on strengthening tax revenue collection has been slow, according to Coronel and further improvements are required to avoid the accumulation of payment arrears and reduce the frequency of supplementary budgets by different spending agencies.
In its monetary policy report for December, Bank of Uganda predicts GDP growth in 2013/14 to be 6.2% up from 5.8% in 2012/13, and, the Bank says, growth is projected to pick up more speed in FY14/15 to 6.5% partly on account of increased private consumption and investment as indicated by the recovery in private sector credit.
Indeed, latest figures indicate that lending by commercial banks is picking up from the sluggishness of the last 18 months. For instance, Shs162.3 billion was borrowed from commercial banks in October last year compared to Shs148.2 billion borrowed at the same time in 2012. That is a 9.5% jump in borrowing.
The annual growth in private sector credit was recorded at 8.95% in Oct. 2013, higher than 8.8% in September and 7.31% in Oct. 2012. This trend is expected to continue in 2014.
The bank said there is going to be continued investments in infrastructure (particularly roads and energy) and improved agricultural production and productivity.
On another positive note, these projections come amid a situation when the global inflationary pressures remain largely contained due to low global commodity prices among other factors despite the fact that in October 2013, inflation developments were still mixed between advanced and emerging economies.
BoU says the outlook for global inflation, which plays a major role in the computation of the local consumer price index (CPI), is to remain suppressed in 2014, as oil prices remain subdued supported by increased non-OPEC supply.
The Bank says however, the risks to the outlook appear to be broadly balanced and warns that, should core inflation rise, as is indeed forecast in 2014, then BOU should gradually increase its key lending rate, the central bank rate. This is likely, as usual, to cause a hike in commercial bank lending rates, which might negatively impact on economic growth prospects for the country.
Jared Osuro, a senior economist, also holds a positive outlook on Uganda's economic prospects, which he says is good for the business sector. He says, whenever economic indicators become favorable, ideally that makes it easy for the private sector to do business, grow positively and contribute to positive economic growth in turn.
He adds that once the government keeps the investment momentum in different sectors of the economy particularly infrastructure and energy, that will also boost growth. Osuro says however, that global factors will have to remain favorable so that trade between these countries and Uganda remain on a positive growth curve.
If that doesn't happen, then we are likely to see 'unwanted growth.'
However, Louis Kasekende, the deputy governor of Bank of Uganda told a news conference at the end of last year that his team will continue to assess the global and domestic economic and financial developments and their implications on the overall outlook for inflation and growth of the Ugandan economy, and take appropriate actions to maintain future average annual core inflation around the medium target of 5%.