KAMPALA–Stanbic Bank Uganda released its headline PMI index for December 2017 which indicated that there had been slight decline in the health of the Ugandan Private sector.
The PMI declined to 54.3 in December, down slightly from 54.9 in November. Though, the headline figure remained above the series average as output new orders, employment and purchases of stocks all contributed to the above 50.0 figure.
Releasing the December PMI results, Jibran Qureishi, Stanbic Banks Regional Economist for East Africa said, “The PMI has averaged 54.0 in the fourth quarter of 2017 up from an average of 52.4 in the nine months to September, as economic activity gradually improves.”
While there have been signs of a pick-up in private sector lending by commercial banks, the high Non Performing Loan (NPL) ratios within the banking sector will probably keep the recovery moderate.
“That being said, an increase in public investment expenditure keeps up optimism that GDP growth will remain on upward trajectory over the coming year,” Jibran added.
Public investment expenditure, projected at 21.1% of GDP in FY2017/18 has been singled out as key to supporting the transformation of the economy.
With that aim in mind the Government of Uganda prioritized infrastructural development in the 2017-18 budget by giving it the second highest budgetary allocation.
Okwenje Benoni Stanbic Banks Fixed Income Manager noted Stanbic Bank plays a key role in supporting the development of Ugandas infrastructure by providing the essential Bank guarantees, Letters of Credit, by purchasing Government bonds and holding escrow accounts for contracted parties.
“These off-balance sheet financial instruments and business solutions were worth over one trillion shillings in 2017.”
Evaluating the performance of the various sectors Benoni revealed, Improvements in operating conditions were broad -based, as the five monitored sub-sectors (agriculture, services, wholesale & retail, construction and industry) each registered stronger business conditions.
Growth in the volume of new orders received at Ugandan private sector companies continued in December.
Amid an easing in political tensions in key trading partners, total new business was boosted by export orders for the second successive month.
This drove companies to expand their output for the eleventh month running.
Higher client demand underpinned the expansions in both output and new business. Benoni concluded.
The PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30%), Output (25%), Employment (20%), Suppliers Delivery Times (15%) and Stocks of Purchases (10%).
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.