Assessing the Effects of Macroeconomic Variables on Economic Growth in Uganda

Abstract

One of the most important objectives for any country is to sustain high economic growth. Even though there are many factors that affect economic growth, this paper has focused on only four that is Inflation, Unemployment Rate, Current Account Balance and Population Size. The relationship between economic growth and these variables is quite contestable as was seen while reviewing the empirical literature. Each researcher seems to be reaching a different conclusion depending on the country or time period under consideration. This study has been carried out using data on Uganda’s economy from 1990 to 2017 extracted from the International Monetary Fund’s World Economic Outlook Database, updated as of April 2018. Linear regression analysis has been used to establish the extent to which the macroeconomic variables under study affect economic growth in Uganda. From the analysis results it was established that Unemployment Rate; Current Account Balance and Population Size have a significant effect of economic growth at 5% level of confidence. Following the research findings the researcher recommended creation of more job opportunities by government and skilling the youths appropriately in order to curb unemployment. The researcher also recommended government to promote domestic industries for value addition if they are to export goods that fetch higher foreign exchange in order to reduce the current account deficit. And finally government was advised on sensitizing the masses on the dangers of over population. Key words ׃ Economic Growth, Inflation, Unemployment, Current Account Balance and Population