Uganda’s economy contracted by 1.6% for the quarter ended March 2022 as the benchmark Central Bank Rate (CBR) was raised to forestall inflation in the latest Bank of Uganda Monetary Policy Statement.
It takes two consecutive quarters of economic contraction to result in a recession.
The CBR was increased by 50 basis points in August 2022 to 9% sending a signal to commercial banks to make loans more expensive. This is aimed at curbing money in circulation to bring down inflation.
“Quarterly GDP estimates by the Uganda Bureau of Statistics (UBoS) indicate that the economy contracted by 1.6 percent quarter-on-quarter in March 2022,” Michael Atingi-Ego said in a statement.
He noted that all sectors of the economy contracted with the services sector taking the biggest hit. In addition, the Composite Index of Economic Activity (CIEA) has continued to signal a slowdown in economic activity at 2.1% in December 2021 to 1.4% in March and June 2022.
Atingi-Ego indicated that the economy was battling numerous shocks such as cost-push inflation, and exchange rate depreciation amidst weak domestic demand. Annual headline inflation and core inflation, which the Central Bank watches closely, rose to 7.9% and 6.3% in July 2022 from 6.8% and 5.5% in June 2022 respectively.