Building on Urban Transformation: Construction as a Jobs Engine (27th Edition)

Uganda's economy is on strong footing and is one of the faster-growing economies in the region, according to the World Bank Group's new Uganda Economic Update: Building on Growth - The Construction Sector as an Engine for Jobs. Real GDP grew by 6.6% in the second half of 2025, up from 6.0% in 2024. This growth has been broad-based, driven by multiple sectors of the economy. This momentum was driven by strong household consumption, and a sharp acceleration in industry, particularly a surging construction sector bolstered by advancing oil and infrastructure projects. Inflation stayed low at 3.0% in April 2026, well within the central bank's target range, providing some relief to ordinary Ugandans.

The Uganda Economic Update, now in its 27^th edition, is a twice-yearly analysis of the country's recent economic performance and near-term macroeconomic outlook. This latest report projects a positive outlook. The country is on the cusp of a significant milestone: the start of commercial oil production. The non-oil economy is expected to grow at a steady 6% in FY2026, driven by investment, agriculture, and services. Once oil comes online, overall economic growth is projected to accelerate to 8.5% in FY2027. Oil revenues are also expected to ease pressure on the government's finances and help boost the country's overall wealth and savings.

However, important challenges remain. The government's fiscal deficit-the gap between what it spends and what it earns - widened to an estimated 6.5% of GDP in FY2026, partly due to election-related spending. Interest payments on public debt now consume nearly a third of all domestic revenues collected, leaving fewer resources for essential services like health and education. Public debt has crossed the government's own ceiling, reaching 52.3% of GDP, and could rise further without corrective action.

On the social front, progress has been made but is uneven. The share of Ugandans living on less than $3 a day has declined to 51.5%, but over half the population still faces significant deprivations in health, education, and living standards. Unemployment sits at 12.2%, and nine out of 10 employed Ugandans work in the informal sector, without the security or benefits that formal jobs provide.

This edition of the Update takes a close look at construction, a sector with enormous potential to create jobs. Construction already grew by 11.6% in FY2025, fueled by public investment in roads and infrastructure. But the sector is held back by significant structural barriers: governance failures that drive informality; market failures that stifle training and make credit expensive; and structural conditions-like high costs and tight credit-that squeeze both contractor funding and household demand.

The report proposes a practical, phased reform agenda built around three priorities:

1. Lay the institutional groundwork. Reform land governance, establish a construction sector regulator, and streamline the permitting process so that building a home or business is faster and less costly.
2. Stimulate demand. Increase labor-intensive public investment, improve urban planning, make serviced land more available, and expand affordable housing programs so that more Ugandans can access decent shelter.
3. Bring down costs and strengthen competition. Expand financing options for contractors, improve procurement practices, reduce the cost of building materials, and invest in vocational training so that more young Ugandans can enter and thrive in the construction workforce.

The bottom line: Uganda's growth story is real and encouraging but sustaining it amidst widening fiscal pressures requires bold structural reform before oil revenues materialize. By unlocking the construction sector's potential, strengthening institutions, activating demand, and boosting competitiveness, Uganda can create jobs at scale, build the infrastructure needed to support a growing population-turning a decade of solid growth into lasting prosperity for all Ugandans.