Michael Atingi-Ego, the Deputy Governor, Bank of Uganda
The Bank of Uganda doesn’t expect a global recession in 2023 despite the international media reporting that the crisis is inevitable.
Michael Atingi-Ego, the Deputy Governor, Bank of Uganda says a global recession is highly unlikely although global economic growth could be slowed down due to a number of factors.
He notes that a slow down in economic growth doesn’t mean a recession.
He made the remarks while issuing the Monetary Policy Statement for December 2022 on Wednesday afternoon at BoU headquarters in Kampala.
The International Monetary Fund and the World Bank define a global recession as an annual contraction in world real GDP per capita accompanied by a broad decline in various other measures of economic activity, including industrial production, trade, capital flows, oil consumption, and unemployment.
Atingi-Ego says Uganda’s financial system is “liquid and well capitalized” to withstand the adverse effects of a slow down in the global economy.
He advises borrowers to focus on domestic production and value addition which will expand Uganda’s export base and thus, slow down on the adverse impact of slowed global growth on the domestic economy.
CBR Maintained At 10%
The Central Bank maintained the Central Bank Rate (CBR), a benchmark lending rate for commercial banks at 10%. This is because the high inflationary pressures are beginning to fade, but there are many uncertainties surrounding the outlook that make the path of returning inflation to the target (of 5%) while keeping the domestic economy on an even keel a narrow one.
Annual headline inflation decreased slightly from 10.7% in October 2022 to 10.6% in November 2022, while annual core inflation declined from 8.9% to 8.8% over the same period.
BoU’s Monetary Policy Committee projects that inflation will continue to moderate, average between 6 to 8% in 2023 and stabilize around the medium-term target by the end of 2023.
“This forecast is 2 percentage points lower that what had been earlier projected,” Atingi-Ego said, adding that the revision in the forecast is due to the dissipating impact of the earlier increases in global commodity prices, subdued domestic demand, effects of the current monetary policy stance, expected decrease in global inflation, and lower exchange rate depreciation.
BoU says the domestic economy remains largely resilient to the current external shocks and is projected to grow in the range of 5.0-5.3% in FY 2022/23 from 4.7% in 2021/22.
This is driven by improvement in agricultural productivity as a result of government interventions, investments in the oil sector and a rebound in industrial activity.
BoU adds that economic growth is projected to strengthen in outer years but remain below its long-run trend until FY 2025/26.
However, the growth outlook remains subject to downside risks, including weaker-than-expected global growth, higher risk aversion in global financial markets amid more aggressive monetary policy tightening in major economies and a further escalation of geopolitical conflicts that could constrain trade and disrupt global supply chains.