- 5 January 2015
While Uganda’s income rises after rebasing and better population estimates, more work is needed to reduce poverty
While Uganda’s income rises after rebasing and better population estimates, more work is needed to reduce poverty.
Uganda’s per capita[i] gross domestic product (GDP) at constant prices for 2013/14 rose by 115% to US$730 and at current prices by 21.2% to US$788. This was after the Uganda Bureau of Statistics released improved and rebased estimates of GDP using a base period of 2009/10 (having previously used 2002) and lower than expected population totals[ii] in November 2014.
Rebasing of the national account series (which includes the GDP) is the process of replacing an old base year[iii] with a new and more recent base year. The base year provides the reference point to which future values of the GDP are compared.
Uganda follows other East and West African countries that have rebased their economies recently. Uganda’s 17% change in GDP after rebasing is the lowest in the region, in Kenya it was 24% and in Tanzania it was 25%. Nigeria’s and Ghana’s economies changed by 89% and 62%, respectively, far ahead of East African countries. However, this was mostly due to differences in previous base periods for West and East Africa (1990 and 1993 for Nigeria and Ghana, respectively, compared with 2001 for Kenya and Tanzania, and 2002 for Uganda). The more regular the revisions, the better the national income estimates.
What changed in Uganda?
The 2013/14 GDP rose by 13.1% from the previous base-period estimates, and the population estimate declined to 34.9 million people lower than the predicted value of 35.4 million people. The growth of the economy in 2013/14 remained at 4.5%, slightly higher than 2012/13 (3.3%). Industry and services sectors maintained higher growth (4.3% and 4.2%, respectively) than agriculture (1.5%).
Services contributed to half (50.2%) of GDP in 2013/14 and the contribution by the agriculture sector continues to decline (from 26.6% in 2009 to 23.3% in 2013). The contribution by taxes was 8.7% in 2013/14, and follows an increasing trend since 2009/10 (7.2%).
How reliable is the new data?
These GDP estimates are more reliable than those of the 2002 base year, simply because 2009/10 is a more recent year. In addition, restructuring of the economy was based on up-to-date recommended methodology (using the system of national accounts (SNA) 2008 and International standard industrial classification (ISIC) rev. 4 and 2009/10 supply use tables (SUT) as a benchmark) and most recent data sources[iv].
What are the major policy implications?
The new estimates express Uganda’s economy in a more accurate way. This implies that better decisions and effective policy evaluations can be made, through a better understanding of the structure of the economy, growth drivers in each sector, and sectors where investment resources and more financing should be budgeted. In addition, without accurate GDP figures we cannot make cross-country comparisons or rank countries convincingly.
Attaining the per capita income of US$1,218 in 2019/20 and US$9,500 in the vision 2040 is more likely to happen with policies based on these up-to-date estimates.
Also to note, compared with other countries in the region the proportion of tax-to-GDP ratio in Uganda is very low (at 8.7%). Neighbouring Tanzania has a tax-to-GDP ratio of 16% and Kenya 20%. Sub-Saharan African countries with tax-to-GDP ratios of greater than 20% are Equatorial Guinea, Seychelles, South Africa, Botswana and Namibia.
What are the opportunities for focus in Uganda?
The continued expansion of the services sector provides room for new opportunities such as accommodation and food services (growth at 11.4%), information and communication (growth at 11.1%), education services (growth at 6.2%), human health and real estate (both at 6.1%).
Opportunities in the industry sector include mining (growth at 5.6%), manufacturing, water and construction. Uganda is planning to start large-scale crude oil extraction by 2018 after commercial reserves estimated at 6.5 billion barrels were found in 2006, and this is expected to increase growth in the sector.
In agriculture, growth is significant in livestock and forestry. Fishing and cash crops experienced negative growth. But with better policies, this sector is expected to attain better growth.
After all this, where are we in terms of development, especially the end of poverty?
Per capita income growth is normally associated with growth in other development indicators such as absolute poverty, literacy rates, proportion of children immunised, and percentage debt service.
However, some indicators have remained unchanged or experienced insignificant change. For example, the net enrolment ratio in primary education (81.8%); the literacy rate of 15–24 year olds (76%); the rate of immunisation against measles (76%); and the proportion of 15–24 year olds who have comprehensive knowledge of HIV/AIDS (38.8%).
Poverty levels and income inequality (Gini coefficient) declined from 24.5% and 0.426, respectively, in 2009/10 to 19.7% and 0.395, respectively, in 20012/13, but these values still show a significant proportion of people who cannot afford basic human needs. Much remains to be done to improve the incomes and secure the livelihood of approximately 43% of the population that is at risk of falling back into poverty in the event of a shock.
Effort is needed to reduce vulnerability and help build the resilience of individuals and communities, especially in northern Uganda where poverty rates remain high as a result of youth unemployment, gender inequality, lack of access to basic services, and low economic development[v].
As observed, a lot needs to be done to reduce the levels of poverty and vulnerability in Uganda. More concentrated effort is needed to improve the quality of life and capabilities of Ugandans as expressed by persistent low literacy rates, poor health status, high unemployment rates, poor education structures and low levels of institutional development.
[i] Per capita GDP is the average production per person of goods and services for a specified period, such as one year. Per capita GDP is often considered an indicator of a country’s standard of living and can also be used to compare the relative welfare in different countries in a given period. However, this indicator is not a measure of personal income.
[ii] The average annual population growth rate between 2012 and 2014 declined to 3.03% from the observed 3.2% between 1991 and 2002. http://www.ubos.org/onlinefiles/uploads/ubos/NPHC/NPHC%202014%20PROVISIONAL%20RESULTS%20REPORT.pdf
[iii] A ‘base year’ is a year when unusually good data on the economy is available.
[iv] Most surveys in Uganda were carried between 2008 and 2010 and these were used in the rebasing exercise. These include Uganda census of agriculture (2008/9), Uganda national household survey (UNHS, 2009/10), the national livestock census (2008), Uganda business inquiry (2009/10), census of business establishments (2009/10), non-profit institutions survey (2009/10) and labour force surveys.
[v] Ministry of finance, planning and economic development (MOFPED), Poverty status report (PSR) 2014, Kampala, Uganda
Photo credit: karen Contador.
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