The Economic Policy Research Centre (EPRC) has today announced the findings of its latest Uganda Business Climate Index (UBCI), Issue No. 52, covering the period July– September 2025. The report indicates a moderate improvement in the overall business environment but reveals significant divergence in performance across major economic sectors.

The overall BCI improved by 7.7 index points, rising from 117.9 in April to June 2025 to 125.6 in the July to September period. The improved outlook is attributed mainly to macroeconomic factors, particularly the strengthening of the Uganda shilling against the US Dollar, a stronger exchange rate, lower input costs, and increased demand, especially among medium-sized businesses in the services sector.

Sectoral Performance: Business sentiment in the Services Surge as those in the Agriculture and Services Stumble

The services sector emerged as the dominant growth driver during the quarter, registering a sharp improvement of 15.2 index points to reach 132.3. This surge in confidence stemmed from increased business activity, sales turnover, and profitability, particularly among medium and large-sized businesses in education, financial intermediation, transport, and warehousing.

“We are witnessing a notable shift in sentiment driven by service-based businesses that have managed to capitalise on better prices and increased demand,” said Ms Rehema Kahunde, Research Analyst and co-author of the survey report. “The improvement in the exchange rate has also alleviated cost pressures for many firms that rely on imports, providing a welcome relief after earlier quarters that were more challenging,” she emphasised.

In contrast, sentiments in the productive sectors saw a notable decline:

• The Agriculture sector sharply declined by 36.5 index points to 105.5, primarily due to the planting season coinciding with sporadic dry spells disrupting demand for agricultural inputs (seeds, fertilizer, tractor hires, herbicides, acaricides among others. This reduced agricultural business activity for agribusinesses engaged in storage, transport, and processing.
• The Manufacturing (Industry) sector also dropped significantly by 32.6 index points to 84.1, with firms reporting reduced business activity and capacity utilisation.

Major Constraints Persist: Power and Multiple Taxation

Despite the overall increase in BCI, structural challenges continue to weigh heavily on businesses. The top two persisted business constraints remain: Power outages (cited by 32.2% of firms), and perceptions of Multiple Taxation (11.3%). These challenges were most severe, especially within the manufacturing and services sectors.

Weak Employment Gains

The BCI showed that improved business conditions did not lead to job creation. Most Businesses (74.2%) retained their existing workforce. The few businesses that laid off workers largely targeted part-time workers, in response to seasonal business activity changes, mainly in the industrial sector.

Strong Optimism for Q4 (October-December 2025)

Looking ahead, businesses remain optimistic about the near-term future (October–December 2025), expecting a notable 16.6 index-point rise to 142.2 in business conditions. This optimism is fueled by the anticipated increase in demand linked to the year-end festive season.

“As we approach the festive season, firms are gearing up for higher demand. This is the time to enable supportive policies that translate optimism into real productivity and inclusive growth,” emphasised Ms Kahunde.

Recommendations for policymakers and business leaders

1. Collaboration on taxpayer education programmes – URA must work with local governments and intensify taxpayer education programmes across the country to explain the differences between central government taxes and Local government fees, levies and dues.
2. Intensify efforts to curb vandalism of power infrastructure – Government must intensity efforts to stop vandalism of electricity infrastructure especially the high voltage pylons whose absence throws large swaths of areas in darkness .
3. Address sector-specific bottlenecks – agriculture and manufacturing remain vulnerable to seasonal shifts, price volatility, and employment fragility. Targeted interventions, such as improving value chains, stabilising input and output markets, and supporting workforce resilience, can help these sectors regain strength.

About the UBCI:

The Uganda Business Climate Index is a quarterly perception-based index produced by the Economic Policy Research Centre (EPRC) to gauge private-sector sentiment and expected economic conditions across three sectors: manufacturing, agriculture, and services. It is designed to offer timely, forward-looking insights that complement official statistics, helping policymakers, investors, and business leaders anticipate shifts in the business environment. It is based on a nationally representative survey of 1,152 randomly selected formal businesses spread across the four regions of the country namely East Central, North, West and Kampala firms across sectors and regions.

During this survey, businesses owners are asked to give their perceptions on whether the level of business activity, sales turnover, profitability, capacity utilisation, cost of inputs, price of produced goods, availability of skilled labour, salaries and wages increased, reduced, or remained the same during the three months. Regarding their future expectations businesses owners are asked whether they expect the above indicators to improve, decline or remain unchanged in the next three months.

In addition, business owners are asked about the major challenges they faced during the last three months. Businesses also state whether some of these challenges have become more of a problem, less of a problem or unchanged in the current quarter compared to the previous quarter. Additionally, businesses owners are asked how any new developments in the economy for example changes in tax administration, policy change, Changes in climate or regional conflicts affected their businesses.

An index score below 100 indicates that business conditions are below potential, 100 signifies potential, and a score above 100 indicates above-potential performance.

For Media Inquiries, Contact:

Alon Mwesigwa, Communications Officer, EPRC; Email: amwesigwa@eprcug.org | Mobile 0784010803

Phone: +256 (0) 414 541023
Website: www.eprcug.org

For More Information

Dr. Brian Sserunjogi
Lead Researcher, Macroeconomics Department, EPRC
Email: info@eprcug.org
Phone: +256 (0) 414 541023
Website: www.eprcug.org

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