The services sector emerged as the dominant growth driver during the period of July to September 2025, according to the Uganda Business Climate Index (BCI) from the Economic Policy Research Centre.
The services sector registered a sharp improvement of 15.2 index points to reach 132.3, with the surge in confidence stemming from increased business activity, sales turnover and profitability, particularly among medium and large-sized businesses in education, financial intermediation, transport and warehousing.
This development in the services sector comes as the overall BCI improved by 7.7 index points, rising to 125.6 in the July to September period from 117.9 in April to June 2025, with the improved outlook 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.
The Uganda Business Climate Index is as 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.
The index is designed to offer timely, forward-looking insights that complement official statistics, helping policymakers, investors and business leaders anticipate shifts in the business environment.
Rehema Kahunde, the research analyst and co-author of the Uganda Business Climate Index report, noted: “We are witnessing a notable shift in sentiment driven by service based businesses that have managed to capitalize on better prices and increased demand.”
“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 emphasized.
Despite the surge of positive sentiments in the service sector of Uganda’s economy, Kahunde highlighted that sentiments in the productive sectors saw a notable decline, as the agriculture sector sharply declined by 36.5 index points to 105.5.
This was primarily due to the planting season coinciding with sporadic dry spells, which disrupted demand for agricultural input seeds, fertilizer, tractor hires, herbicides and acaricides, among others. This reduced agricultural business activity for agribusinesses engaged in storage, transport and processing.
Additionally, the manufacturing sector also dropped significantly by 32.6 index points to 84.1, with firms reporting reduced business activity and capacity utilization. Speaking about the constraints that are affecting businesses, Kahunde highlighted the issue of power outages, which was cited by 32.2 per cent of firms that participated in the survey, with the challenge of multiple taxation that stood at 11.3 per cent.
The BCI showed that improved business conditions did not lead to job creation. Most businesses (74.2 per cent) 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.
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,” emphasized Kahunde.
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