Mitigating the Effects of the Credit Crunch through Trade: The Case of Uganda

Abstract

The global financial crisis is envisaged to cause substantial global economic instability in the foreseeable future. More worrying however is the fact that the developing countries, which at the start of the crisis seemed to be far away from its effects (first round) will most likely bear a considerable share of its blunt (through the second round effects). In the developing world, Sub-Saharan Africa is likely to be severely affected largely because of the high level of susceptibility of most of its economies to external shocks (through the various transmission channels) and also from the fact that these economies had steadily started to be integrated into the global economy over the last one and half decades. This paper analyzes how Uganda could exploit export market diversification as one of the possible responses to the potential impacts of the global financial crisis. It provides an overview of the possible impact of the crisis on the macroeconomic outlook and ways in which the effects can be mitigated with regard to casting a wider export destination for Uganda’s products. The analysis indicates that Uganda can diversify her export markets by capitalizing on the regional market as well as emerging markets in Asia, the Middle East and Europe.