BOU Predicts Brighter Economic Outlook, Reduces CBR to 17%

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In short
The governor attributes the brighter economic outlook to declining inflation from 18% in June to 14.3% in July, stagnation in the domestic credit and aggregate demand, stability of the foreign exchange rate and decline in global and local commodity prices.

The Bank of Uganda has painted a positive economic outlook for the country and now expects inflation to fall to single digits by the end of the 3rd quarter (September 2012).
                    
Bank of Uganda governor Tumusiime-Mutebile announced today, taking into account recent positive developments in the economy, annual core inflation is now expected to fall to single digits by end of December. He said it is even expected to fall further down by 7% end of the calendar year 2012.
 
Furthermore, he announced that the targeted inflation of 5% is likely to be achieved by the first half of 2013. Earlier on, the government had forecast bringing it down to 5% in the medium term (end of 2013).
 
The governor attributes the brighter economic outlook to declining inflation from 18% in June to 14.3% in July, stagnation in the domestic credit and aggregate demand, stability of the foreign exchange rate and decline in global and local commodity prices.
 
He also warned of certain risks to the outlook: mainly volatility in the exchange rate although he declined to say from where the volatility might arise.
 
Accordingly, Mutebile said the improvement in the prospects for inflation, together with the need to stimulate stronger growth domestic demand growth; the BoU reviewed the CBR by 2% points from 19% in July to 17% in August. A big jump of 2%.
 
He said the reduction is expected to have an impact on the rate at which commercial banks lend to each other and should translate to lower lending rates to their customers.
 
This, he hopes, will stimulate the recovery in private sector credit. The ultimate aim is that this will boost the economy.

 

Mentioned: bank of uganda