Publication: Uganda Economic Update, 16th Edition, December 2020: Investing in Uganda’s Youth

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Uganda’s real GDP grew at 2.9 percent in FY20, less than half the 6.8 percent recorded in FY19, due to the effects of the COVID-19 (coronavirus) crisis, and is expected to grow at a similar level in FY21, but downside risks are high. Economic activity stalled during the latter part of the fiscal year due to a domestic lockdown that lasted over four months, border closures for everything but essential cargo, and the spillover effects of disruption in global demand and global supply chains due to the COVID-19 pandemic. This resulted in a sharp contraction in public investment and deceleration in private consumption, which hit the industrial and service sectors hard, particularly the informal service sector. On a calendar year basis, real GDP growth is expected to contract by up to 1 percent in 2020, compared to 7.5 percent growth in 2019, and, as a result, real per capita GDP growth is expected to contract by about 4.5 percent. Even if GDP growth rebounds strongly by 2022, the level of per capita GDP is likely to remain well below its pre-COVID trajectory. As a result of these impacts, the COVID-19 crisis is threatening to reverse some of the gains made on structural transformation and the declining poverty trend of the past decade. This transformation was characterized by a reduction in the workforce employed in on-farm agriculture and a take-off in industrial production, largely in agro-processing. However, following the COVID shock, there have already been widespread firm closures, permanent layoffs in industry and services, a rapid slowdown of activity particularly in the urban informal sector, and a movement of labor back to farming. At the same time, household incomes have fallen, which is concerning given the high levels of vulnerability to poverty, limited social safety nets, and impacts this might have on human capital development and Uganda’s capacity to benefit from its demographic transition.
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World Bank. 2020. Uganda Economic Update, 16th Edition, December 2020: Investing in Uganda’s Youth. © World Bank, Washington, DC. License: CC BY 3.0 IGO.
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