Lower Inflation Marks Positive Trend for Uganda

Uganda closed the year 2024 with an annual inflation rate of 3.3%, down from the 4.2% recorded at the end of 2023. This becomes a positive development for the country’s economy, though the December rate was slightly higher than the 2.9% recorded in November 2024.

Core Inflation and Key Contributors

Samuel Echoku, the Head of Macroeconomic Statistics at the UBOS, discussed the findings during the release of the inflation indices on Tuesday. He attributed the 3.3% inflation to various factors, emphasizing core inflation.

What seems to be driving annual core inflation upwards is the annual services inflation, which jumped to 6.1% in December 2024 from 5.9% in November,” said Echoku. Contributing factors were passenger transport by road, recording an inflation rate of 4.8% for the year to December 2024. A similar case scenario was witnessed for restaurants and accommodation services.

Goods and Food Prices

Echoku noted that the inflation rate for other goods was flat at 2.2% in December 2024, just like the previous month of November. This, he linked to reduced prices of maize flour. “Maize flour prices declined significantly, recording -13.4% in December from -18.2% in November,” he said.

Another highlight was recorded within the food sector, which had a yearly inflation of food crops and related items of -0.7% in December 2024; this, from a November statistic of -4.0%. Decreased food inflation had been essentially reflected by declining fresh vegetable prices, particularly the price for leaf vegetables that witnessed a contraction of -11.6%, amidst falls in fresh beans, tomatoes, eggplants, carrots, and Irish potatoes.

Fuel and Utilities

Inflation for fuels and utilities decreased slightly, reaching 1.0% in December 2024 from 2.2% the previous month. Such a decrease indicates easing pressure on essential commodities and relief to both households and businesses.

Outlook

Improvement in Uganda’s inflation indicates some stabilization of prices in food and fuel. However, the slight increase in core inflation, driven by services, highlights the need to continue monitoring economic trends. Maintaining low inflation will be crucial in driving economic growth and ensuring the products are affordable for Ugandans as they enter the 2025 financial year.

Echoku’s report makes one thing clear: how strategic measures become necessary for such fluctuating keys towards transportation and services, besides making the most of progress realized in food and fuel. The government and other stakeholders are most likely to zero in on sustaining this trajectory to promote long-term economic stability.