Will Uganda attain a middle income economy by 2020

By Zuurah Karungi

Presenting at Kampala Serena Hotel in February this year, the senior economist at the WB country office, Ms Rachael K. Sebudde, said: “For Uganda to achieve middle income status by 2020 Gross Domestic Product (GDP) must grow by 10 per cent,” To attain this, every Ugandan including children should be able to earn Shs 309,600 every month. With just two weeks left to reach the proposed year, experts think a lot more needs to done as the economy is still lagging behind. Whether Uganda will be a middle income country by 2020 remains a matter of debate.

 According to Chris Asiimwe a financial expert, a country attains a middle income status when its per capita income is $1370.

“As we speak, Uganda’s per capita income has been $ 700 for the last two years and has never exceeded that. There is no magic that will be done to turn around the income in the next two weeks, to me that dream will not be realized,” he adds.

He adds that Uganda’s economy has ups and downs where the county has a fast growing population with a static eco system, no improvement in the infrastructure, land and less room for investment which to him is caused by the political insecurity in the country that threatens investors.

According to a government report given by Uganda Bureau of Statistics named Uganda National Household Survey 2016/17, the poverty line has increased from 19 per cent to 27 per cent. This to Asiimwe affects the economic growth since growth comes along with demand. The poverty line being 27 per cent means there will be less demand and growth.

“The worst thing is that 70 per cent of the Ugandan population is below the age of 35 and the majority unemployed. To be a middle income county, we need to increase on the output which is impossible with a population full of unemployed people,” he notes.

Economic dynamics

He further notes that Uganda’s economy was growing steadily in the early years when the population was low. This has not been the case when people are increasing in numbers with the majority below the poverty line.  

“Right now, the GDP has fallen from 5.5 per cent to 3.9 per cent and to be a middle income economy, the GDP must grow by 10 per cent,”.

Ms Sebudde added that in the first quarter of FY 2016/17, the country registered a negative growth of 0.6 per cent. She said that private investments had pulled up the economy in early years but have gradually gone down and to increase GDP, there needs to be improvement in public investments as well as bringing private investors on board.

Challenges

Asiimwe points out political unrest as the sole hindrance of economic growth in the country. To him the government should aim at providing a good political environment which will entice potential investors and realize its dream. He adds that for a country to have a sustainable economy there should be increased investment to create employment.

If the country doesn’t invest in its people. People are supposed to be trained and given skills on how to operate to increase quality output and employment. This has not been the case since most industries here hire labour from other countries.

“The high interest rates in financial institutions makes it hard for the economic growth since most companies operate on loans,” he adds.

Analysis

“For 2015, the estimated GDP was at $24.69 billion or per capital of $705.What will it take Uganda to reach the minimum level of $1,045? Assuming a conservative population growth of 1.15 million people per year, from 34.9 million in 2014, Uganda will be close to 42 million people in 2020. To realize middle income status, Uganda will need a GDP of $43.89 billion or an increase of 78 per cent over the next five years,”

Asiimwe adds that Kenya has a GDP of USD 1370 making it a lower middle income country but Uganda has never reached USD 1000. This year, Uganda targets a per capita growth of 5.5% and reaching 10 per cent could be hard unless projects like oil and gas and public investments are improved.

According the National Development Programme 2016, Poverty was to be reduced from 19.7 per cent to 14.2 per cent, this has not been attained as the UBOS report indicates an increase to 27 per cent in 2017, the report further indicates that people living in poverty now are 10 million up from 6.6 million in the previous years.

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