By Our Reporter
Uganda’s business climate experienced a slight deep in fortune in the first quarter of the year 2025 as the economy experienced headwinds from the increase in prices of goods and services, and fears of global trade tariff wars.
The Economic Policy Research Center recently released the Uganda Business Climate Index report for the months of January to March 2025 showing mood swings in the economy as purchases and consumption dropped. Dr Brian Sserujongi, a senior research fellow at EPRC’s Macroeconomics department, in a presentation about the research findings, noted: “Overall private sector confidence during the January-March quarter has slightly declined, but businesses have remained optimistic.”
The Uganda Business Climate Index is a critical tool that captures real-time business sentiments and informs evidence-based policymaking for Uganda’s private sector development.
It looks at consumption patterns and purchases of goods and services, among other tools. The quarterly index measures business perceptions among 1,152 formal enterprises nationwide. The index offers critical insights into the operating environment for micro, small, and medium enterprises which are the backbone of Uganda’s economy.
The business climate index dropped by 2.3 points from 91.1 in the previous quarter of October to December 2024 to 88.8 in January to March 2025.
“While we saw a modest drop in business confidence, particularly among micro and small enterprises, the outlook remains positive. The decline reflects real but manageable challenges in the operating environment,” Sserujongi said.
The report highlighted improved business sentiment in the manufacturing sector, which grew by 4.8 index points to 81.6, from 76.9. The improvement of business sentiment in the manufacturing sector was attributed to increased product prices, profitability and capacity utilization, mainly among large firms in the soft drinks, cement and pharmaceuticals sectors.
Agriculture recorded a modest decline of four index points with agricultural businesses particularly in the small and medium-sized enterprises dealing in tea, milk, flowers, inputs, and post-harvest equipment citing reduced profitability, labour shortages and declining business activity as the drivers of the decline.
The services sector recorded a decline of 1.2 index points, with the businesses in forex, cargo handling, the creative arts, and real estate recording drops in profit, business activity and reduced sales turnover.
Additionally, the index also identified the challenges affecting the business environments such as multiple taxation concerns, which rose by 5.2 index points (from 72.0 to 77.2); competition from informal businesses increased by 5.6 index points (from 62.8 to 68.4); unreliable power supply also became a more serious problem, rising by 6.9 points (from -4.1 to 11.0) compared to the previous quarter.
EPRC executive director Dr Sarah Ssewanyana emphasized the importance of the government implementing these recommendations.
“The uptake is high, but the implementation is not really in our control.”
