Low lending rates boosting output – report

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By Mark Keith Muhumuza

Kampala.

There is continued increase in output, new orders, employment and the purchase of new stocks, according to the June 2017 Stanbic Bank Purchase Managers Index (PMI). The monthly index rose to 52.8 in June up from 51 in May 2017 driven by growth in the services and industrial sectors.

Mr Jibran Qureishi, the regional economist East Africa at Stanbic Bank, revealed that the private sector recovery is in part being driven by the easing monetary policy regime.

“The private sector continues to recover supported by the easing of the monetary policy stance for the better part of the last year or so. We suspect as inflationary pressures have subsided somewhat over the past couple of months; the MPC may still cut its key benchmark rate at its next meeting in August. However, that could possibly be the last rate cut of the year,” he said.

For the last one year, Bank of Uganda has eased the monetary policy, setting the Central Bank Rate (CBR) at a historic low of 10 per cent in June 2017.

Banks have also been reducing lending rate – rather sluggishly – responding to the CBR. The reduced lending rates could eventually revive private sector borrowing, which explains the positive trend in the PMI.

“The upward trajectory of two of the private sector monitored categories namely Industry and Services performed so well they more than offset the worsening of the overall operating conditions in the remaining sectors,” said Ms Anne Juuko, the Stanbic Bank head of global markets.

PMI is designed to provide an overall view of economic trends in the Ugandan economy with interviews conducted with 400 private sector manager. PMI below 50 indicates a decline and above 50 an expansion.

Monitor.co.ug

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