Elevated macroeconomic risks hurt business environment perceptions

The Uganda business climate index declined by 22.4 points to 94.8 during the July – September 2015 quarter from 117.2 during the July – September 2014 quarter. This indicates a remarkable slowdown in the conditions for doing business in Uganda. This is the first time in five survey rounds that the index points to an uncertain business environment and elevated business climate risks. The slowdown in business perceptions was largely driven by some persistent challenges in doing business and some new emerging ones. In particular, the business environment suffered on account of volatility in the macroeconomic environment characterized by the weakening of the Uganda Shilling, rising interest rates and an unfavorable inflationary outlook. Moreover, macroeconomic factors, substandard products, and tax policy were considered more of a problem in the current period than in the previous. At the sectoral level, business sentiment in the agricultural sector was particularly downcast due to falling international commodity prices particularly for coffee, tea and cotton. Business perceptions and expectations for the next quarter (October – December 2015) remain subdued on account of the forthcoming general election, rising inflation and interest rates, low global demand for commodities, and fragility of the regional political environment. The Uganda business climate index declined by 22.4 points to 94.8 during the July – September 2015 quarter from 117.2 during the July – September 2014 quarter. This indicates a remarkable slowdown in the conditions for doing business in Uganda. This is the first time in five survey rounds that the index points to an uncertain business environment and elevated business climate risks. The slowdown in business perceptions was largely driven by some persistent challenges in doing business and some new emerging ones. In particular, the business environment suffered on account of volatility in the macroeconomic environment characterized by the weakening of the Uganda Shilling, rising interest rates and an unfavorable inflationary outlook. Moreover, macroeconomic factors, substandard products, and tax policy were considered more of a problem in the current period than in the previous. At the sectoral level, business sentiment in the agricultural sector was particularly downcast due to falling international commodity prices particularly for coffee, tea and cotton. Business perceptions and expectations for the next quarter (October – December 2015) remain subdued on account of the forthcoming general election, rising inflation and interest rates, low global demand for commodities, and fragility of the regional political environment.