Uganda’s Business Confidence index, as reported by the Sigmanomics database on December 3, 2025, registered at 57.20. This figure is below the market consensus estimate of 59.00 and down from November’s 57.80 reading. The index remains above the 12-month average of 58.10 but signals a softening momentum compared to the mid-year peak of 59.30 in May 2025.

Drivers this month

• External shocks from regional trade disruptions weighed on export-oriented sectors.
• Tightening monetary policy raised borrowing costs, dampening investment appetite.
• Fiscal consolidation efforts limited government spending, affecting infrastructure projects.

Policy pulse

The current reading sits below the central bank’s comfort zone for growth-supportive confidence, reflecting cautious business sentiment amid inflationary pressures. The Bank of Uganda’s recent rate hikes to 12.50% have tightened financial conditions, contributing to the subdued confidence.

Market lens

Immediate reaction: The UGX/USD currency pair depreciated 0.30% within the first hour post-release, reflecting investor caution. Short-term yields on government securities edged up by 5 basis points, signaling risk repricing.

Core macroeconomic indicators provide context for the business confidence trend. Uganda’s GDP growth forecast for 2025 stands at 5.10%, down from 5.50% in 2024, reflecting global demand softness and domestic supply constraints. Inflation remains elevated at 7.80% YoY, above the central bank’s 5% target range, driven by food and energy prices.

Monetary Policy & Financial Conditions

The Bank of Uganda’s monetary tightening cycle, with the policy rate raised by 150 basis points since mid-2025, has increased lending costs. Credit growth slowed to 9.20% YoY in November, down from 11.50% in June, constraining business expansion.

Fiscal Policy & Government Budget

Fiscal consolidation efforts aim to reduce the budget deficit from 6.30% of GDP in 2024 to 5.50% in 2025. However, reduced capital expenditure has slowed infrastructure development, impacting business confidence in construction and manufacturing sectors.

External Shocks & Geopolitical Risks

Regional instability and fluctuating commodity prices have disrupted supply chains and export revenues. The ongoing East African trade tensions and global commodity price volatility pose downside risks to confidence.

Historical comparisons show that the current reading is above the April 2025 low of 58.40 but below the August 2025 reading of 58.30. The index’s volatility aligns with shifts in monetary policy and external trade conditions.

Market lens

Immediate reaction: The UGX currency weakened by 0.30%, and 2-year government bond yields rose by 5 basis points, reflecting investor recalibration of risk amid the softer confidence reading.

Looking ahead, Uganda’s business confidence faces a mix of headwinds and tailwinds. The base case scenario projects a gradual recovery to 58.50 by mid-2026, supported by easing inflation and stable monetary policy. This scenario carries a 55% probability.

Bullish scenario (25% probability)

• Improved global demand boosts exports and investment.
• Monetary policy stabilizes with inflation returning to target.
• Fiscal stimulus accelerates infrastructure projects.

Bearish scenario (20% probability)

• Prolonged geopolitical tensions disrupt trade flows.
• Inflation spikes force further monetary tightening.
• Fiscal constraints deepen, reducing public investment.

Structural & Long-Run Trends

Uganda’s long-term growth prospects hinge on structural reforms in governance, infrastructure, and diversification. Business confidence is sensitive to progress in these areas, which can unlock investment and productivity gains over the next decade.

In summary, Uganda’s December 2025 Business Confidence index signals a cautious business environment amid tightening financial conditions and external uncertainties. While the index remains above expansionary levels, the downward trend since mid-year underscores the need for prudent policy management and structural reforms. Monitoring inflation, fiscal discipline, and geopolitical developments will be key to sustaining confidence and economic growth.

Key Markets Likely to React to Business Confidence

Business confidence readings in Uganda historically influence currency, bond, and equity markets sensitive to economic growth and risk sentiment. The following tradable symbols have shown strong correlations with Uganda’s business confidence trends:

• USDUgx – The USD/UGX exchange rate typically weakens when confidence rises, reflecting capital inflows.
• UGSE – Uganda Securities Exchange index reacts positively to improved business sentiment.
• BTCEUR – Bitcoin’s EUR pair often mirrors risk appetite shifts linked to emerging market confidence.
• EURUGX – Euro to Ugandan Shilling exchange rate moves inversely with local confidence.
• EABL – East African Breweries Limited stock, sensitive to regional economic conditions, tracks confidence changes.

FAQ

What is Uganda’s Business Confidence index?

The index measures the optimism of businesses regarding economic conditions, investment, and growth prospects in Uganda.

How does business confidence affect Uganda’s economy?

Higher confidence typically leads to increased investment, hiring, and consumption, driving GDP growth and financial market performance.

Why did Uganda’s Business Confidence decline in December 2025?

The decline reflects tighter monetary policy, fiscal consolidation, and external shocks impacting trade and investment sentiment.

Key takeaway: Uganda’s business confidence is moderating but remains expansionary, highlighting the delicate balance between policy tightening and growth prospects.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.