Macroeconomic and Sectoral Effects of the EAC Regional Integration on Uganda: A Recursive Computable General Equilibrium Analysis

Macroeconomic and Sectoral Effects of the EAC Regional Integration on Uganda: A Recursive Computable General Equilibrium Analysis

This paper empirically examines the implications of the implementation of the EAC regional integration on the Ugandan economy. It adopts the General Equilibrium Model (CGE) for the analysis based on the Uganda 2007 Social Accounting Matrix. Results indicate that the aggregate impact of internal tariff reduction under conditions of unemployment and free movement of factors of production is positive, with average GDP growth improving by up to 0.3 percentage points over the period 2008 - 2021. However, reductions in tariffs have negative implications for tax collections, with import duties contracting by 0.3 percentage points and no significant gains in direct taxes revenues. The rise in exports to the EAC region leads to a decline in the trade deficit by 0.8 percent in the simulation period. There are also significant growth gains for agriculture (1.2 percentage points), industrial and service and sectors (both 0.7 percentage points). Thus, Uganda should optimise gains within the EAC regional integration framework through tariff reduction and free movement of factors of production. Infrastructural constraints should also be addressed to foster growth in the manufacturing sector within the EAC.

Date:	2013-05-10
Author:	Isaac Shinyekwa & Joseph Mawejje

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• Published May 10, 2013