Standard Chartered Bank has said Uganda is likely to maintain low inflation because of low international oil prices, which by yesterday closed at $26.13 for a barrel.
Inflation for the year ended March, according to Uganda Bureau of Statistics, reduced to 3 per cent due to a reduction in prices of clothes, footwear and related products.
However, Standard Chartered said, it was already clear that Uganda and Africa at large will, going forward, experience contracted growth due to the effects of Covid-19.
Speaking during a webcast discussion, Ms Razia Khan, the Standard Chartered Bank managing director and chief economist for Africa and the Middle East, said the low international oil prices are expected to compress movements of inflation downwards.
However, she said, the effects of Covid-19 are likely to hit Uganda and Africa harder than the great depression.
“What is clear is that we are now seeing a very weak base in growth for Uganda’s economy. Our projection is a growth rate of 5 per cent in 2021. However, the good news is the current low international oil prices will help Uganda keep pressure on inflation low,” she said.
However, Bank of Uganda in its Monetary Policy Statement on Monday projected growth to fall to about 3 per cent from 6 per cent.
The webcast, which was hosted by Standard Chartered Bank, had been discussing the likely effect of Covid-19 across Africa, the continent’s trading partners and the likely implications on monetary and fiscal policy.
Ms Khan also projected that the Central Bank will further reduce the Central Bank Rate to at least 7.5 per cent in the short term, noting that it was important that government puts in place measures that will help the economy to recover from the effects of Covid-19.
Shilling to weaken
According to Ms Eva Otieno, the Standard Chartered principle Africa strategy, foreign exchange rates and credit research, African currencies are likely to depreciate against the dollar with the shilling expected to weaken to Shs3,950 before the close of this year.