Uganda’s inflationary outlook for 2024 reveals a mixture of modest improvements and persistent economic challenges, according to the latest data from the Uganda Bureau of Statistics (UBOS). The Annual Average Headline Inflation for the year was recorded at 3.3 percent, a notable improvement from the 5.4 percent inflation rate reported in 2023.
This decline signals a positive shift in Uganda’s economic stability, driven by factors such as price stability in key sectors and reduced inflationary pressures in essential commodities. The decrease was attributed to a combination of lower costs in energy, utilities, and food. However, while the overall inflation rate reflects relative stability, there are several aspects that warrant closer attention.
According to data from UBOS, theimproved inflation figures are largely driven by a decrease in Annual Core Inflation, which registered at 3.6 percent in 2024, compared to 4.7 percent in 2023. Core inflation, which excludes volatile food and energy prices, is a critical indicator of underlying economic trends. This reduction points to sustained price stability in sectors such as clothing, household equipment, and healthcare, which has eased the burden on consumers.
However, not all sectors shared in this relief.
Certain areas, notably restaurants and accommodation services, experienced inflationary pressures. Prices in this sector rose by 4.8 percent during the year ending December 2024, up from 3.8 percent in the previous month. This spike highlights the continued vulnerability of the service industry to inflationary forces, particularly in the wake of global and domestic economic shifts.
The food sector presented a more complex picture. While the Annual Food Crops and Related Items Inflation remained negative at -0.7 percent, the figure marked a significant improvement from the -4.0 percent recorded in November 2024. This was primarily due to declines in the prices of key staples such as fresh beans, maize flour, and rice. However, price stability in the food sector was not universal, as some produce, including matooke (plantains), tomatoes, and avocados, saw increased costs, adding a layer of volatility to food price trends.
Energy and fuel costs, which significantly influence Uganda’s economy, experienced considerable fluctuations throughout the year. By December, the Annual Energy, Fuel, and Utilities (EFU) Inflation stood at 1.0 percent, down from 2.2 percent in November. While this decline can be partially attributed to lower charcoal prices, the rising prices of liquid fuels, particularly petrol and diesel, continued to pose a threat to economic stability. These ongoing fuel price fluctuations have contributed to persistent uncertainty in both the transportation and energy sectors.
Agricultural performance in 2024 offered some respite. Favorable weather conditions led to improved crop yields, easing pressure on food prices. Despite this, the volatility of perishable goods like tomatoes and onions, which saw significant price swings, remains a concern for consumers and policymakers alike.
Policy measures introduced by the Bank of Uganda played a crucial role in stabilizing the inflationary environment. Through managing liquidity and implementing strategies to curb inflationary pressures following global economic shocks, the central bank has contributed to containing inflation in key sectors. Interest rate policies, alongside government subsidies in certain industries, have helped alleviate the impact of rising costs.
Despite these efforts, Uganda’s inflationary landscape continues to exhibit vulnerabilities. The service sector, particularly in transportation and accommodation, remains highly sensitive to inflationary pressures, with prices for passenger transport increasing steadily throughout 2024. Additionally, essential services such as education and healthcare, while showing minimal price declines, continue to be prohibitively expensive relative to household incomes. This highlights the ongoing challenge faced by many Ugandans in managing the rising costs of daily living.
While Uganda’s inflation outlook for 2024 shows positive signs of improvement, particularly in core inflation and food prices, the country faces ongoing challenges, especially in the service sector and with volatile energy costs. Policymakers will need to remain vigilant in managing these pressures to ensure continued stability in the coming months.
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