A new report by Fitch Solutions reveals positive prospects for household spending in Uganda throughout 2024. The report, titled “Uganda 2024 Consumer Outlook,” predicts robust real household spending growth with a year-on-year increase of 6.3 percent. This growth is expected to elevate total household spending from Shs63.8 trillion in 2023 to Shs67.9 trillion by the end of 2024.
Controlled levels of inflation are identified as a key factor underpinning stronger demand. As consumers experience improvements in purchasing power, accelerated growth in consumer spending is anticipated. Rising household disposable incomes, stronger private sector activity, and accelerating economic growth are cited as additional factors contributing to the positive outlook.
The forecast aligns with expectations for real economic growth to strengthen to 5.8 percent in 2024, up from 4.6 percent in the previous year. Investments in Uganda’s oil sector, such as the $10.0 billion Lake Albert Oil Project and the $4.0 billion East Africa Crude Oil Pipeline, continue to attract significant inflows.
Private consumption is set to benefit from lower inflation and the pass-through effects of monetary easing. The Central Bank’s decision to cut its policy rate by 50 basis points to 9.50 percent in August is expected to support private consumption. Anticipated further loosening of regulatory measures, including potential reductions in the policy rate, further contributes to the positive outlook.
Lower inflation is predicted to provide relief to real incomes, supporting household spending. The report indicates that private consumption is expected to grow by 6.4 percent in 2024, making a substantial contribution of 5.6 percentage points to real GDP growth.
Unemployment rates are projected to remain steady at 3.8 percent of the labor force throughout 2024. The limited weakening of the shilling is expected to result in a steady cost outlook for imported goods, further supporting consumer spending.
Fitch Solutions emphasizes that controlled inflation will likely prompt the Bank of Uganda to consider rate cuts, stimulating consumer activity. The forecasted inflation rate is expected to average 4.1 percent in 2024, providing a sense of price stability and contributing to increased business and consumer confidence.
The easing of food inflation is identified as a significant contributor to consumers spending more on food-related segments and other categories. Overall, the positive outlook for household spending indicates positive economic momentum for Uganda in 2024.
