Free Access | 2024-04-12

Uganda’s Business Climate improves amidst declining manufacturing and agricultural sector performance

Authors/Editors: Rehema Kahunde ,  Hildah Namuleme ,  Steven Katende

Abstract:

The Business Climate Index (BCI) improved marginally by 7.7 index points from 117.9 in the previous quarter April-June 2025) to 125.6 in the current quarter (July - September 2025). Improved input prices, favourable product prices and increased business activities, as well as business sales/ more business orders, caused the increment in business sentiments during the current quarter. This increase was largely because of improved macroeconomic factors, especially the exchange rate, higher product prices, and increased demand, which was more evident in medium-sized businesses. At the sectoral level, business sentiments within the service sector registered sharp improvements of 15.2 index points, rising to 132.3 in the current quarter from 117.1 in the previous quarter, emanating from increased business activity, sales turnover, favourable selling price and profitability, mainly among large and medium-sized businesses in education, monetary intermediation, transport, and warehousing and storage services. On the contrary, sentiments in the agriculture and manufacturing sectors sharply declined by 36.5 and 32.6 index points to 105.5 and 84.1 from 141.5 and 116.7. The post-harvest season partly caused the deterioration in business sentiments within the agriculture sector, slowing production and causing crop prices to fall, which reduced income and turnover for agribusinesses engaged in storage, transport, and processing. Additionally, the quarter experienced sporadic dry spells that disrupted planting and led to lower demand for inputs such as seeds, fertilizers, and post-harvest Executive Summary equipment. Although business conditions improved, employment gains remained weak. Businesses laid off more workers than they hired, especially part-time employees, a situation that reflected the vulnerability of temporary jobs. Layoffs of temporary workers were most pronounced in the industrial sector.