Progress on Covid-19 Vaccines Improves Economic Outlook

Risks to the economic outlook in the near term have brightened with the progress on the Covid-19 vaccines, signs of recovery in private demand and the additional boost to growth expected from fiscal policy, according to theBank of Uganda Monetary Policy Report December 2020

'The economic outlook is extremely uncertain, due to the unpredictable course of the virus, election related factors, continued weakness in global economic activity, weather-related natural disasters and escalation of geopolitical tensions, trade policy uncertainty and technology fractions.

The downside risks to the economic growth projection include the possibility of an increase in new infections and a longer period to get the virus under control, periodic spouts of global financial market volatility, and increasing protectionism by trading partners,' the report reads in part.

The private sector credit extensions could remain subdued due to increasing Non-Performing Loans (NPLs), high lending interest rates in the face of weak economic activity and increase in domestic financing of the fiscal deficit, according to the December 2020 Monetary Policy Report.

'On the upside, however, economic growth could recover swiftly if global economic growth strengthens, private sector credit recovery is sustained, and the vaccine is widely distributed.'

To access the entire Bank of Uganda December 2020 Monetary Policy Report, please click on thisLink