The Ugandan economy is emerging from the devastating impact of the COVID-19 (coronavirus) health pandemic, but prospects for growth are undermined by increasing pressure on its natural resources, according to the latest World Bank economic analysis for the country.
The 17th Uganda Economic Update (UEU), From Crisis to Green Resilient Growth: Investing in Sustainable Land Management and Climate-Smart Agriculture, says that the COVID-19 shock caused a sharp contraction of the economy to its slowest pace in three decades. Household incomes fell when firms closed and jobs were lost, particularly in the urban informal sector. The country’s Gross Domestic Product contracted by 1.1 percent in 2020, and is estimated to have recovered to 3.3 percent during the 2021 fiscal year.
“Following the job losses and closure of small businesses, many people returned to agriculture and other natural resources dependent activities to manage and survive the crisis,” said Tony Thompson, World Bank Country Manager for Uganda. “This further strains natural resources, which were already under pressure from rapid population growth, urbanization, a refugee influx and the country’s drive for industrialization.”
From the severe contraction in economic activity and its subsequent impacts on livelihoods during 2020, the report notes that signs of recovery have strengthened, underpinned by improved business and trading conditions as COVID-19 restrictions ease. Domestic investments picked up during the last quarter of 2020 in line with global invest recovery. Manufacturing and construction recovered during the quarter ending March 2021 while the cash crop sector has sustained agricultural sector growth.
The economic growth outlook is 4.6 percent in the 2022, and acceleration to 6.4 percent in the 2023 fiscal year, as domestic demand conditions improve, and global recovery continues as COVID-19 vaccines are rolled out.
The UEU says that Uganda’s immediate priority remains to save lives by intensifying measures to limit the spread of the coronavirus disease. Yet, the report says sustaining recovery will require the government to manage emerging risks including from widening fiscal deficits, escalating costs for small businesses, and climate shocks and loss of its natural capital.
“As the crisis abates, fiscal consolidation and prioritization of spending towards human capital development and greener investments will be the lynchpin into a greener, resilient and inclusive recovery,” said Rachel Sebudde, World Bank Senior Economist and lead author of the report.
The significant shift of Ugandans to agriculture in response to the crisis has heightened the urgency for the country to enhance sustainable use of natural resources. According to the report, land degradation, deforestation and climate risks contribute to the country’s economic vulnerabilities and poverty. Annual decline in forest cover, by 2.6 percent, is one of the highest rates of forest loss globally and climate risks, including slow onset change and extreme events exacerbate this natural capital degradation.
The combined cost to the economy of land degradation and unsustainable soil erosion, is estimated at 17 percent of gross domestic product (GDP). Environmental degradation can cause a loss of 27 percent of agricultural GDP, says the report.
The World Bank suggests the macro-economic recovery and stimulus packages to be combined with structural measures that will sustainably increase productivity and build resilience to enhance livelihoods, the economy and general well-being.
“Farmers and producers need greater access to appropriate financial incentives and instruments to overcome the cost barrier adoption of sustainable land management and climate smart agriculture,” said Pushina Ng’andwe, World Bank Senior Agriculture Economist and report co-author.
The Bank also recommends that the government to promote sustainable land management practices to protect, conserve and ensure better use of land, soil, water, and biodiversity resources, while restoring degraded resources and their ecosystem functions. Encouraging climate-smart agricultural practices will enhance resilience, the UEU says, as well as reduce greenhouse gases emissions, and boost national food security.
Intra-Regional Trade Potential a Key Focus in New Report
A new focus report, produced by Oxford Business Group (OBG) in partnership with the African Economic Zones Organisation (AEZO), shines a spotlight on the continent’s rapidly developing industrial sector, which is poised to become a key driver of broader economic growth as regional integration increases.
Titled ”Economic Zones in Africa – Focus Report”, the report was launched at the AEZO’s 6th Annual Meeting II, which took place on November 25 at the African Continental Free Trade Area (AfCFTA) Secretariat office in Ghana, with participants also able to attend remotely. The meeting was held under the banner “Connecting African Special Economic Zones (SEZs) to Global Value Chains at the era of the AfCFTA” and explored a range of topical issues relating to SEZs, from their potential to boost trade to the impact of Covid-19 on the continent’s supply chains.
The focus report examines the wealth of benefits that the AfCFTA is expected to deliver to both Africa’s economic zones and the businesses located in them, which range from greater market access to a reduction in trade barriers and lower production costs.
The disruption that the pandemic brought to supply chains and the opportunities emerging from the health crisis for businesses to become part of nascent regional value chains across a more closely connected continent are a key focus.
The report also charts the digital transformation taking place in many of Africa’s economic zones, as businesses make the move away from traditional segments to high-tech processes and digital services, adding value to their offerings in the process.
In addition, it provides in-depth analysis of the drive evident among many SEZs to put environmental, social and governance principles and sustainable business practices at the heart of their strategies, at a time when ethical investment and alignment with the UN Sustainable Development Goals are high on the global agenda.
The report includes in-depth case studies and viewpoints by representatives from key industry players namely: Tanger Med; Polaris Parks; Lagos Free Zones; Ghana Free Zones Authority; Misurata Free Zone; and Sebore Farms.
It also includes a contribution from Ahmed Bennis, Secretary General, AEZO, in which he highlights the role that SEZs are playing in the continent’s industrial transformation and the importance of supporting their development.
“Economic zones can play a game-changing role in Africa’s diversification and inclusion by providing end-to-end solutions and services that support industrial upgrades and increase countries’ attractiveness for investment,” he said. “With the implementation of AfCFTA and the post-Covid-19 recovery that the world is beginning to experience, we believe that real investment opportunities exist in Africa at this moment, which can translate into job creation and social and economic development. Africa has resources that need to be developed and economic zones can play a key role in this.”
Bernardo Bruzzone, OBG’s Regional Editor for Africa, added that while African economic zones had experienced production problems during the pandemic due to global supply chain disruptions, ongoing remedial action, including new infrastructure and human capital development, would help provide resilience against future external shocks.
“Africa’s real GDP growth is forecast to reach 3.4% in 2021, with an increase in intra-regional trade and improved connectivity among the facilitators of economic recovery,” Bruzzone said. “Looking ahead, we see economic zones as having a key role to play in helping the AfCFTA achieve its potential through the development of new strategies that will lead to a more diverse, higher-value range of exports.”
The study forms part of a series of tailored reports that OBG is currently producing with its partners, alongside other highly relevant, go-to research tools, including a range of country-specific Growth and Recovery Outlook articles and interviews.
Lagos Budget N1.4 Trillion for 2022, Budget Surpasses Five Other Southwest States Combined
Lagos state government has proposed N1.388 trillion budget for the year 2022. The proposed budget was presented to the House of Assembly on Wednesday.
While presenting the proposed budget, Governor Babajide Sanwo-Olu said the State would be spending N325 billion on vital infrastructure projects in key sectors to energise and expand the growth of the State’s economy.
The key areas of growth identified by the Governor include Works and Infrastructure, Waterfront Infrastructure Development, Agriculture, Transportation, Energy and Mineral Resources, Tourism, Entertainment and Creative Industry, Commerce and Industry, Wealth Creation and Employment.
The proposed budget, christened “Budget of Consolidation”, will be the last full-year fiscal plan of the State before the next general election.
About N823.4 billion, representing 59 per cent of the 2022 budget, is earmarked for capital expenditure. Recurrent expenditure, representing 41 per cent, is N565 billion, which includes personnel cost, overhead and debt services.
Of the total proposed expenditure, N1.135 trillion would accrue from Internally Generated Revenues (IGRs) and federal transfers, while deficit financing of N253 billion would be sourced from external and domestic loans, and bonds projected to be within the State’s fiscal sustainability parameters.
The State would be earmarking an aggregate of N137.64 billion, representing 9.92 per cent of the 2022 budget, for the funding of green investment in Environment, Social Protection, Housing and Community Amenities.
“This financial proposal is presented with a sense of duty and absolute commitment to the transformation of Lagos to a preferred global destination for residence, commerce, and investment. The budget projects to see a continuing but gradual recovery to growth in economic activity as the global economy cautiously recovers from the impact of the Coronavirus pandemic,” the governor said while presenting the budget to the house.
Meanwhile, the 1.388 trillion budgeted for 2022 is higher than the budget of the five other southwest states combined. For 2022, Ekiti State’s budget is 100.7 billion, Osun 129.7 billion, Ondo 191billion, Oyo 294 billion. Ogun’s budget for 2022 is not yet finalised, but going by their 2021 budget of 339 billion, the combined budget of the five South-West states then amount to 1.053 trillion. With this, Lagos state budget is higher than the five states budget with a difference of 335 billion.
Nigeria’s Export Trade to Surpass $100 Billion by 2030 – Report
New research conducted by the Standard Chartered Bank has predicted that Nigeria’s export trade will reach an amount of $112 billion in 2030, and will then be recording a Year-on-Year increase of 9.7 percent.
The research also led to the projection that India, Indonesia and Mainland China will be the major avenues leading to an increase in the country’s involvement in global trade.
The research is titled “Future of Trade 2030: Trends and Markets to Watch,” and also projected that the global exports trade will grow from $17.4 trillion and reach $29.7 trillion between 2021 and 2030. It was also projected that the trade will be largely moved by 13 markets, some of which are Bangladesh, India, Hong Kong, Malaysia, Mainland China and Kenya. Others that will drive the trade are Nigeria, South Korea, United Arab Emirates, Vietnam, Nigeria, Saudi Arabia and Singapore.
The report added that the Asia Pacific, the Middle East and Africa will have the biggest share of fast-growing markets in the future. It also said that these three regions will see an increase in investment flows, with about 82 percent of respondents in the research confirming their desire to bring up new production locations in these regions within the next five to ten years. This act would support the trend towards rebalancing to upcoming markets and greater risk diversification of supply chains.
The research also said that global trade will be revamped by five vital trends, which are the wider adoption of sustainable, fair-trade practices, demand for more inclusive participation, greater risk diversification, increased digitization and a rebalancing towards high-growth upcoming markets.
Close to 90 percent of the corporate leaders contacted for the study agreed that these five trends will shape the future of trade and form part of their five to ten-year expansion strategies across borders.
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