Tight monetary conditions were imposed throughout most of 2015/16 by the central bank to counter the depreciation of the shilling. This increased lending rates to around 25 percent, thus increasing the cost of capital and slowing down investment despite continued infrastructure funding from China.
Growth is expected for 2017, as oil-related infrastructure projects are scheduled to enter construction and improvements to the transport and power networks continue to take shape.
Infrastructure spend is set to increase over the coming years as the government looks to improve the country’s road and rail networks and undertake construction of key bridges, such as the Nile bridge in Jinja. In 2016, construction also started on the 1,614km standard gauge railway line in Uganda, which aims to connect the country with its East African neighbours the Democratic Republic of Congo, Kenya, Rwanda and South Sudan.
The lack of a skilled labour and the opaque tendering process in the country remain chief deterrents to operating in the market.
The country’s economic growth outlook is optimistic, with GDP growth expected to average 6.3 percent over the medium term. The government’s economic policies are expected to remain focused on keeping inflation low and boosting growth.