Outlook for 2011-12

• Presidential and parliamentary elections on February 18th could provide the greatest challenge yet to the president, Yoweri Museveni, and his National Resistance Movement (NRM), who have ruled Uganda since 1986.
• The popularity of Mr Museveni, along with the advantages of incumbency, should ensure that he wins more votes than his main rival, Kizza Besigye.
• There will be outbreaks of violence around election day, but Mr Museveni has total control of the Ugandan army and has strengthened his grip on the police force, which makes wider political instability unlikely.
• The Economist Intelligence Unit forecasts that real GDP growth will quicken to 6.3% in 2011 and 7% in 2012, owing to a pick-up in investment and external demand, but poor transport and energy infrastructure will limit expansion.
• Inflation is forecast to accelerate in 2011, owing to higher global food and fuel prices, and to remain high in 2012 because of looser fiscal policy.
• The fiscal deficit as a percentage of GDP is forecast to narrow to 2.1% in 2010/11, owing to a one-off capital gains tax haul, before widening to 3.2% in 2011/12 as a result of weak domestic revenue growth.
• External imbalances will widen as import growth picks up, and we forecast a current-account deficit of 4.4% of GDP in 2011 and 6.2% of GDP in 2012.

Monthly review

• The NRM has been buoyed by the findings of three national opinion polls on voter intentions, all of which predicted wins for the president and his party, with the level of support for Mr Museveni measured at 65-67%.
• Around 300 independents have announced that they will stand in the parliamentary election. Most of these are affiliated to the NRM, which raises the risk that they will split the party vote and lose seats.
• An Afrobarometer poll has found that more than 70% of respondents expect there to be violence after the elections, and the US government has already warned its citizens against travelling in Uganda in the election period.
• The East African Community has started negotiations to establish a monetary union, but the current degree of macroeconomic convergence is insufficient for this to be sustainable and the target of 2012 is completely unrealistic.
• The government announced plans to release USh7.1bn (US$3.1m) in February as part of the second phase of the Northern Uganda Social Action Fund.
• The Uganda shilling fell to an all-time low of USh2,400:US$1 in mid-January. Political uncertainty, low export earnings and strong demand for US dollars in the energy sector contributed to this.