The Minister of Finance, Matia Kasaija has noted that the country’s economic growth projections in FY2019/2020 has been revised downwards from 6.0 percent to between 5.2 5.7 percent depending on the severity of the COVID-19 impact on Uganda.
While addressing Parliament on Thursday, the Minister noted that the country’s revenue collections will register an additional shortfall of about Shs82.4 billion for the remaining period of the FY2019/2020 (March-June) and about Shs187 .6 billion in FY2020/2021 assuming that the corona virus does not enter Uganda or that it is quickly contained hence avoiding widespread infections within the population.
Kasaija said that the Corona virus will mainly impact international trade taxes (reduction in value of imports) as well as consumptive taxes (VAT and Excise duty) due to the slowdown in the industry and services sectors.
The Minister noted that the biggest impact on the economy will be on the services sector adding that travel restrictions are already affecting the tourism sector including hotels, accommodation and transportation. Supply chain disruptions are hampering trade, and this is expected to continue until the virus is contained at the global level.
“Travel restrictions at the global level will also affect the flow of imports into the country leading to disruption in supply of inputs into the Industry sector. This will affect industrial output,” Kasaija said.
He added that the low activity in industry and services sectors will result into loss of jobs further leading to a decline in economic growth and an increase in the level of poverty. The number of people that could be pushed into poverty is estimated at approximately 780, 000.
Kasaija noted that in the event that the virus enters Uganda and spreads rapidly (as experienced in some African countries such as Egypt, South Africa and Algeria), the impact on the economy, the budget and the population would be significantly higher than discussed above.
“In the worst-case scenario, there would be country wide restrictions on the movement and gathering of people (closure of schools, places of worship, entertainment venues, sporting events, etc) and closure of borders. This would have more significant effects on the economy and livelihoods of people. In this scenario, economic growth for FY2019/2020 would decline to between 4.6 percent and 5.1 percent. An additional 2.6 million Ugandans would be pushed into poverty.”