Land of Opportunity?

GDP growth figures good, but wide gap between rich and poor worries economic experts

A recent report released by Uganda Bureau of Statistics (Ubos) showing the revaluedrebased GDP figures has raised questions about the actual status of Uganda’s economy. Is it better now compared to 200809? Are the new figures being felt by the majority of the population? Where is the future of this economy?

UBOS said the new estimates have ensured a better coverage of the economy than in the past and has resulted in an increase in the 200910 GDP level of 17.3% compared to the previously published current price GDP estimate. In 201314, the economy grew in real terms by 4.5% at 200910 constant prices, compared to 3.3% in 201213.

According to the data, the agriculture sector – comprising cash crops, food crops, livestock, forestry, fishing and related support activities – grew fastest by sector contribution to GDP at 26%, up from 24% on the back of increased value addition. Services contribution to GDP increased marginally to 49% from 46% over the period with notable increases in telecoms, trade, and health and business activities.

The change in the figures has seen an increase in other key indicators such as per capita income. The average income person per year (per capita) has shot to $788 (Shs 2.4m) in 201314 from $607 (Shs 1.5m) per current prices in 200809.

These numbers point to one major thing – Uganda has become richer but the economy remains poor, according to George Mulindwa, the business development manager at African Alliance. Other analysts say ordinary Ugandans may not easily feel a change in these figures in their pockets at the moment as many remain in the informal sector and many others still earn little to be able to meet their daily expenses. Indeed, UBOS figures show that while poverty reduced to 22% in 201213 from 24.5% in 200910, income inequality – the gap between the rich and the poor – increased to 43.1% from 42.6%. This is the challenge that the government must tackle on the road towards achieving the country’s middle-income status as per Vision 2040, the experts say.

Racheal Sebude, the senior economist at the World Bank, said rebasing Uganda’s economic data is a good thing. “By these figures, they are saying that they had not captured or estimated what is going on in the economy by that much,” she told The Independent on Dec. 3. “Now, they have a true picture of what is going on in the economy and the value of production of goods and services is 17.3% higher than what we thought.”

Sebude said that although the figures went up, “we can’t say that the economy is better than what it was yesterday we can say that we have a better picture of what our economy is.” She argued that for one to say that the economy is now better off, they will have to use new trends showing by how much the economy has been growing.

She however said that the new figures would support government’s planning processes. For instance, the new numbers give a clear picture of how much of the new figures [goods and services] were being paid in taxes and how much of that is being exported. It also gives a clear picture of the sectors that are contributing more and the others doing less so as to put in place measures to deal with each of them.

Commenting on agriculture, Sebude suggested that the agriculture sector’s bigger weight was good news but it presented a challenge to the government and the private sector. “We know it is employing more than 75% of the labor force but bulk of that is still in subsistence which is not good,” she said, adding that the government and the private sector need to work together to formalize agriculture by addressing issues such as access to inputs, marketing of agriculture output both within and outside of Uganda among other things.

The biggest worry, according to Sebude, is that the industry sector is much smaller “yet they are talking about transformation”. “Yes we can move into high quality services but the bulk of the services we see today are very low productivity services retail and small shops everywhere… we have seen people moving away from agriculture to very low productivity services like retail shops, which is not good at this time when we are talking of transformation,” Sebude said.

Like Sebude, Mulindwa from African Alliance, said this remains a poor economy despite the new economic data, which means more investment is required in the key sectors of the economy – energy, transport and agriculture. He added that the boom in the services industry is something not to celebrate about given the fact that most of the big firms are foreign-owned, which means there is an element of profit repatriation.

Chris Mukiza, the UBOS director for macro-economic statistics, held a similar view. He said agriculture must be incentivized and also particular focus must be placed on the services and manufacturing to accelerate the economic growth momentum.

Kenneth Egesa, the director of statistics at Bank of Uganda, was optimistic that the latest data would boost investor confidence in the country as growth in GDP is taken to be a positive indicator of the health of the economy.

Going forward, Sebude was positive about the prospects for the economy not only on account of the oil industry but also because of the huge investment in infrastructure. “If they go well we should expect more jobs, faster growth of economy and hence the ability of the people to save,” she said.


Source : The Independent

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