Low demand for goods pushes inflation down

Thursday May 2 2013

A fruit vendor in Nakasero market.

A fruit vendor in Nakasero market. The decline in inflation, from the macro-economic point of view means that Uganda’s economy is currently experiencing low inflationary pressure. PHOTO BY FAISWAL KASIRYE 

By MARTIN LUTHER OKETCH

Stability in the price of manufactured goods, especially sugar, and the decline in meal charges in restaurants has helped Uganda to register a decline in inflation rate.

The decline means the public spent less on manufactured goods in April 2013 compared to April 2012.

The Consumer Price Index (CPI) released by Uganda Bureau of Statistics (Ubos) Tuesday, shows that Uganda’s annual headline rate for the year ending April 2013 decreased to 3.4 per cent from 4.0 per cent registered in March 2013.

Ubos explains that this was largely attributed to the decrease in the annual core inflation rate from 6.8 per cent for the year ended March 2013 to 5.8 per cent for the year ending April 2013.

The price
The principal statistician at Ubos, Mr Vicente Nsubuga Musoke, told the Daily Monitor that prices of manufactured goods in April were low and stable compared to last year when prices of manufactured goods, especially sugar, went up significantly due to a sugar shortage that was being experienced in the country.

“Although prices are still high, they were not as high as they were in 2012 that saw people spend more on manufactured goods,” he said.
The decline in both the annual headline and annual core inflation means that Uganda’s economy is currently experiencing low inflationary pressure that raises hope for increased investment in the economy by the private sector.

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Expert’s view
Senior research fellow at Economic Policy Research Centre Lawrence Bategeka, said what matters is the affordability of goods and services available.

“Inflation is low in Uganda at the moment because of low demand of goods (commodities) by the general public leading to low prices of commodities including food crops due to increased supply in the market. What this means is that we are still operating in difficult economic conditions because the purchasing power of the public is low.”
Dr Bategeka further explained that Uganda’s macro-economic environment is characterised by low fiscal expenditure and low supply of money in the economy because the government is not spending as much as it was in the past years, a situation which has seen some public servants like teachers unable to receive their salaries.

“The exchange rate in the country is currently solid with the Uganda Shilling appreciating against the US dollars and other currencies, while at the same the declining inflation rate has saved Uganda from imported inflation,” he said.

Trend of inflation rate in Uganda

Month Inflation rate
December 5.3 per cent
January 4.9 per cent
February 3.5 per cent
March 4 per cent
April 3.4 per cent

moketch@ug.nationmedia.com

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