Determinants of Economic Growth in Uganda (2010-2023)

Abstract

The study will examine the determinants of economic growth in Uganda. Specifically, to examine the effect of Foreign Direct Investment on economic growth, to examine the effect of population growth on economic growth, and to examine the effect of foreign aid on economic growth in Uganda. The study will use a time series design since it focuses on a single entity, unlike panel data. It focused on understanding the impact of Foreign Direct Investment (FDI), population growth, and foreign aid on Uganda's economic growth over time. The data was processed and analysed using the E-views statistical package. This model is suitable for analysing single-variable time series data. The VAR model will help quantify the interdependencies between industrial sector growth and its determinants, allowing us to explore dynamic relationships. ARDL models were useful when examining both short-term and long-term relationships between industrial sector growth and its determinants, especially when the variables are of different orders of integration. The study was conducted in a way that all information provided by the various bodies was handled with due confidentiality. The researcher obtained an introductory letter from BSU REC and the Bank of Uganda to secure approval to conduct the study before data collection commenced. To maintain confidentiality and privacy, information obtained was kept confidential and accessible. The study concluded that there is a strong positive relationship between population growth and economic growth (r = 0.7751). However, the relationships between economic growth and the other two variables, FDI (r = 0.01171) and foreign aid (r = 0.09076), are very weak, suggesting minimal direct linear association in the dataset. The study further concluded that 95% of the variation in economic growth is explained by the three independent variables combined. The study recommends that strengthening regulatory oversight and promoting partnerships that build local capacity can help maximise the developmental impact of foreign investment. Authorities should improve planning, transparency, and monitoring systems to ensure aid is channelled into priority sectors such as infrastructure, education, and health. Implementing results-based frameworks and involving local stakeholders in aid program design can increase efficiency and foster sustainable outcomes. The study further recommends that the government should adopt a balanced approach by investing in human capital development, particularly education, skills training, and healthcare, to transform population growth into a demographic dividend.