In a groundbreaking revelation, a report by the London-based financial information services company, Fitch Solutions, has forecasted a dazzling surge in household spending in Uganda for 2024.
The report, titled “Uganda 2024 Consumer Outlook,” predicts an unprecedented 6.3 percent year-on-year growth, propelling total household spending from Shs63.8 trillion in 2023 to a staggering Shs67.9 trillion by the end of 2024.
Controlled levels of inflation are anticipated to underpin this robust spending spree, as consumers revel in improvements in purchasing power, catapulting accelerated growth in consumer spending.
The report underscores that rising household disposable incomes, a flourishing private sector, and an accelerating economic landscape will act as potent tailwinds for this economic extravaganza.
Notably, the report aligns its forecast for robust consumer spending growth with a broader economic surge. Projections indicate a strengthening real economic growth of 5.8 percent in 2024, a significant leap from 4.6 percent recorded in 2023.
The ongoing development in Uganda’s oil sector, particularly with monumental projects like the $10.0 billion Lake Albert Oil Project and the $4.0 billion East Africa Crude Oil Pipeline, continues to attract substantial investment, providing a robust foundation for overall economic expansion.
Meanwhile, private consumption is set to receive a boost from lower inflation and the pass-through effects of monetary easing.
The Central Bank’s decision to cut policy rates by 50 basis points to 90% last August, coupled with the amendments in H224 to consolidate the Bank of Uganda Act, is expected to further decrease the policy rate to 8.50 percent by year-end, fostering an environment conducive to heightened consumer activity.
Lower inflation is poised to alleviate real incomes, offering additional support to household spending.
The report unveils a projection that private consumption will soar by 6.4 percent in 2024, contributing a substantial 5.6 percentage points to real GDP growth. Furthermore, unemployment rates are forecasted to remain steady at 3.8 percent of the labor force throughout 2024, providing a stable backdrop for sustained consumer spending.
In the currency realm, the limited weakening of the shilling from Shs3,690/$ in 2023 to Shs3,871/$ in 2024 is anticipated to translate into a steady cost outlook for imported goods, providing an additional tailwind to the overall economic outlook.
The deceleration of inflation in Uganda, plummeting from a peak of 10.3 percent in January 2023 to the single-digit percentages posted in December 2023, is hailed as a positive trend.
Cedric Chehab, the Managing Director of Country Risk at Fitch Solutions Company International, emphasizes that controlled inflation will not only prompt the Bank of Uganda to consider rate cuts but will also ignite a surge in consumer activity.
Chehab prudently forecasts inflation to average 4.1 percent in 2024, marking a return to pre-pandemic trends observed between 2015 and 2019, where inflation averaged 3.8 percent.
This promising trajectory is expected to instill confidence in both businesses and consumers, paving the way for a period of stability and increased spending across various sectors.
The easing off of food inflation is identified as a crucial factor contributing to heightened consumer spending across diverse segments.
As Mr. Cedric Chehab succinctly puts it, “This will boost business and consumer confidence as a sense of price stability returns, and the easing off food inflation will be a key contributor to consumers spending more on the segment and other categories.” Uganda is poised for an economic renaissance, and the stage is set for an extraordinary consumer boom in 2024.
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