Business confidence in the country has fallen sharply for the first time since January 2017 as companies come to terms with Coronavirus (COVID -19) wave, a survey has shown.
The Purchase Managers Index (PMI) for March 2020, a survey published by Stanbic bank and mainly talks to owners of businesses show that confidence fell to 43 points, regarded as poor.
Above 50 points is regarded as high confidence that things are better.
The survey says “fall in new business, company shutdowns and issues with the supply of raw materials have pushed the Ugandan private sector into contraction.”
Kenneth Kitungulu, the Stanbic head of global markets said in a statement that “COVID-19 caused issues in supply chains, with difficulties securing raw materials, particularly from China.”
He added that “lower the activity also contributed to declines in both purchasing and inventories, while suppliers’ delivery times lengthened in part due to border closures.”
According to the survey, central to the decline in business conditions were reductions in both output and new orders as people were told to stay home and businesses shut.
The fall in the business will have an impact on growth as well as poverty. Economist Dr. Fred Muhumuza has predicted that as many as 17 million Ugandans could fall below the poverty line.
Bank of Uganda’s executive director for Research Dr. Adam Mugume has said the economy will grow at less than 5%, a drop from the earlier projected 6%.
On Monday, Bank of Uganda is expected to announce a cut in the Central Bank Rate (CBR), a key rate that will make banks to cut interest rates to support businesses to borrow.
But the lockdown of the economy to stop the spread of covid-19 means businesses will hardly operate – this means more job losses, closure of businesses and despair.