Business Climate Deteriorates Further as Fears of the South Sudan Conflict Grips Businesses in Uganda

For the second consecutive quarter, the perceptions on Uganda’s business environment deteriorated. This negative sentiment about the business environment could emanate from the lag effects of the electoral cycle, pass through effects of exchange rate depreciation and the re-ignition of political strife in South Sudan, which is a major export destination. Lower than potential domestic demand and uncertainty in macroeconomic conditions have elevated the perceived risks for doing business in the current quarter. Business sentiment in agriculture was positive, for the second consecutive quarter, while business sentiment in the manufacturing and services sector was downcast. A recovery is expected in the next quarter owing to sustained performance by the agriculture sector and a recovery of manufacturing and service sector shored by lower input and production cost improving profitability and capacity utilization. However, the recovery will depend on improved domestic demand, favourable weather, and pacification of South Sudan.