Tourism Unlikely To Return To Normal Any Time Soon – Mutebile

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Uganda’s tourism sector, a linchpin of the economy, will remain a drag on economic growth as flows remain uncertain on account of costly containment measures by the government, Bank of Uganda Governor Emmanuel Tumusiime-Mutebile has said.

Passenger traffic going through Entebbe International Airport declined in June, with 75,472 passengers being registered compared to 85,054 in April. The numbers remain way below pre-pandemic levels.

“The COVID-19 restrictive measures that remain in place will continue to weigh on the economic activity, with economic growth projected in the range of 3.5 to 4.0% in the financial year 2021/2022. In particular, between COVID-19 stops and starts, tourism is unlikely to return to normal levels any time soon,” Mutebile said.

“Significant uncertainties continue to surround the economic outlook. The outlook continues to be highly conditional on the containment of the spread of the pandemic which will be premised on the vaccination rates and the extent to which standard operating procedures (SOPs) arc observed. 

“The emergence of vaccine resistant varaints would however prompt the reintroduction of restrictions on gatherings and mobility, which will derail the economic recovery. Conversely, reduced spread of the virus and a faster rollout of vaccines could speed up and strengthen economic recovery relative to current projections,” he said. 

The PMI survey initially confirmed that a recovery is underway as it showed that economic activity has regained momentum since February.

COVID-19 infections remained under control in Q1, allowing for an improvement in economic activity as life slowly returned to normal with only limited containment measures still in place at the time.

A sharp pick-up in cases since May has forced authorities to introduce a 42-day lockdown, with movement limited to essential workers only.

As a result of the uncertainty, the Monetary Policy Committee maintained the Central Bank Rate (CBR) at 6.5% to encourage financial institutions to reduce the cost of borrowing by the private sector to spur growth. The CBR is a signal rate for financial institutions.

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Uganda’s economy contracted 1.1% in 2020 because of the pandemic and the related containment measures.

After running out of vaccines, the country suspended its vaccination programme at the beginning of June as it awaited additional supply. Unsurprisingly, the PMI fell to 34.9 in June from 56.5 in May as the impact of the lockdown brought the recovery to a halt.

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