KAMPALA (Reuters) – The pace of expansion of private sector activity in Uganda slowed in May, weighed down by weak exports as conflicts in neighbouring countries disrupted regional trade, a survey index showed on Monday.
The Markit Stanbic Bank Uganda Purchasing Managers’ Index (PMI) slipped to 50.0 from 53.5 in April. The survey report said new export orders had declined in May on the back of reduced demand from key markets.
“A notable slowdown in new orders was perhaps the main trigger in May, which is not entirely surprising given that Uganda’s key export markets continue to face enhanced political risks,” said Jibran Qureishi, economist for East Africa at Stanbic Bank.
Unrest in South Sudan, eastern Democratic Republic of Congo and Burundi has made Uganda’s transport links to those markets insecure and disrupted the flow of trade.
Qureishi said economic activity could rebound in the second half of the year as access to credit improves.
The central Bank of Uganda (BOU) has been cutting its benchmark lending rate for about a year, trying to spur credit flows and lift flagging growth.
In April the bank said the economy was now unlikely to expand by 4.5 percent in the fiscal year 2016/2017 as it had previously forecast. Last month the International Monetary Fund cut its forecast to between 3.5 and 4 percent from 5 percent, blaming drought and slow credit growth.
The PMI report said input costs had risen in May for most firms amid an increase in prices for raw materials, including sugar and food items.
Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence.
(Editing by George Obulutsa and Mark Trevelyan)