Uganda Economic Update, 20th Edition
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Washington, DC: World Bank
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The Ugandan economy will need to grow
rapidly, sustainably, and broadly (i.e., in a shared
manner), to reach middle-income status, lift its population
out of poverty, and generate enough jobs for one of the
fastest growing populations in the world. To do so, the
country needs to unlock its growth potential by allocating
productive factors to their most efficient uses. However,
like many least developing countries, Uganda suffers from a
small domestic market and distortions, which leads to
misallocation of resources. As a result, international trade
will play a critical role in solving some of the current
challenges faced by the Ugandan economy and ultimately
boosting economic growth and development. For Uganda,
greater integration into global value chains will be crucial
to create jobs outside of subsistence agriculture and the
informal economy. Sustained growth in trade will also
increase consumer welfare by expanding options and lowering
prices of consumer goods. Regional trade agreements can help
Uganda diversify its range of markets and products,
mitigating the risk of external shocks by lessening
dependence on any single trading partner. Greater
intra-African trade also offers opportunities to add more
value to export commodities and to leverage the potential of
agribusiness to promote inclusive growth. The African
Continental Free Trade Area (AfCFTA) offers opportunities
for Uganda to deepen its access to regional markets and
exploit the growth potential of the region. Expanding
regional and continental trade offers significant benefits
for Uganda, including potential economies of scale, new
export opportunities, access to higher levels of the value
chain, and forums to improve trade facilitation. However,
non-tariff barriers continue to limit trade, including the
discriminatory use of technical regulations, non-harmonized
sanitary and phytosanitary requirements, and complex rules
of origin. Security challenges such as the closure of the
border between Rwanda and Uganda in 2019 has also
constrained regional integration. To benefit fully from the
AfCFTA, Uganda and her neighbors will need to overcome
hurdles that have long weakened the effectiveness of
existing regional arrangements by facilitating better trade
through improved logistics, infrastructure, addressing
non-tariff barriers and avoiding the politically motivated
trade barriers like border closures.