Prepare for slower economic growth

By Editor

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The Covid-19 pandemic has caused an unparalleled contraction in Uganda’s Gross Domestic Product.

 The Finance ministry has said Uganda’s economy is projected to grow by 3.1 per cent this financial year, a rate lower than the pre-pandemic projection of 6.2 per cent.
The worsening economic conditions as a result of the Covid-19 pandemic have already placed an excessive burden on the business community. 

Several people are already worried about the economy ahead as economic experts have warned that the January 14  General Election “could heighten uncertainty and slow down investments” - both domestic and foreign direct investment and economic activity - which has already been affected by the pandemic. 

No wonder several investors have decided to hold back on big ticket investments ahead of the General Election until things clear up.
In its December 2020 report, Bank of Uganda reechoes what many people see ahead in terms of economic uncertainty: “The economic outlook is extremely uncertain, due to the unpredictable course of the virus, election-related factors, continued weakness in global economic activity, weather-related natural disasters and escalation of geopolitical tensions, trade policy uncertainty and technology fractions,” the report reads in part.

Several risks still cloud the economy. 
The downside risks to the economic growth projection include the possibility of an increase in new infections and a longer period to get the virus under control, periodic spouts of global financial market volatility, and increasing protectionism by trading partners.
Future growth in consumer spending is likely to be slower than it has been for many years. 

Therefore, any business leader must now be considering how to best position themselves for harsher macroeconomic conditions after elections.

Leaders should also ensure that their business can withstand several scenarios. For example, companies that reserve financial buffers will be better able to respond to unanticipated threats or opportunities, and those with shorter planning cycles can better adapt to new information. 

As economists hotly debate how quickly the economy will recover once elections are done, it is advisable to invest cautiously until the politicking wanes and the economy begins to stabilises. 
Going by the speed of vaccine development across the world, it is time for leaders to look ahead and start planning more rigorously for the phase of economic recovery.