Uganda’s economy remains resilient despite inflation and Shilling pressures
The report indicates that key high-frequency economic indicators continued to point to expansion and resilience across the economy during the month.
Uganda’s economy maintained strong momentum in May 2026, supported by sustained business activity and improving investor confidence, despite rising inflationary pressures and a weakening local currency, according to the latest Performance of the Economy Report.
The report indicates that key high-frequency economic indicators continued to point to expansion and resilience across the economy during the month.
The Purchasing Managers’ Index (PMI), a key measure of private sector activity, remained firmly above the 50-point threshold at 54.1 in May, signaling continued growth in business activity and improved operating conditions.
Business confidence also strengthened during the period. The Business Tendency Index (BTI) rose to 56.7 in May from 55.2 in April, reflecting optimism among businesses across most monitored sectors of the economy.
The improvement in business sentiment was largely attributed to strong consumer demand, which continued to support sales, production, and investment decisions.
Despite the positive outlook, inflation edged higher during the month. Annual headline inflation increased to 3.2 percent in May from 3.0 percent recorded in April.
According to the report, the increase was mainly driven by higher transport and energy-related costs following a rise in domestic fuel prices. However, inflation remains well below the government’s medium-term target of 5.0 percent, suggesting that overall price pressures remain relatively contained.
The report also highlighted pressures on the foreign exchange market, with the Uganda Shilling registering a depreciation against the US Dollar.
The local currency weakened by 1.3 percent during May, trading at an average mid-rate of Shs3,764.11 per US dollar compared to Shs3,716.70 in April.
The depreciation was largely attributed to increased demand for dollars by traders seeking to finance higher energy imports and freight costs. The report notes that continued geopolitical tensions in the Middle East have contributed to rising global energy prices, increasing pressure on Uganda’s import bill and foreign exchange demand.
Nevertheless, the overall performance of the economy suggests that Uganda remains on a stable growth trajectory, supported by robust private sector activity, resilient consumer demand, and relatively low inflation.
Analysts say maintaining macroeconomic stability amid global uncertainties will be critical in sustaining investor confidence and supporting economic growth in the months ahead, particularly as businesses continue to navigate higher import costs and exchange rate fluctuations.
