Effect of the industrial sub-sectors on the economic growth of Uganda for the period 1983 to 2022

Abstract

The primary aim of this study was to examine the effect of the industrial sub-sectors on economic growth of Uganda from 1983 to 2022, with a specific focus on the industry, manufacturing, and construction subsectors. A quantitative research design was employed, utilizing historical data from these key industrial subsectors to avoid sample bias. The analysis applied the Autoregressive Distributed Lag (ARDL) model to investigate both the short- and long-term relationships between these subsectors and Uganda's economic growth. Results revealed a weak positive correlation between GDP growth and industry, manufacturing, construction, labor force participation rate, and gross capital formation. Industrial growth has a mild association with GDP growth, while manufacturing shares may slightly dampen growth. Construction activities are significantly associated with economic expansion, and the labor force participation rate may not necessarily translate into GDP growth. The ARDL model demonstrated that in the long run, the construction subsector had a highly significant positive impact on GDP, with a coefficient of 0.48 (p < 0.01), indicating its critical role in driving economic growth. The industry subsector exhibited a marginally significant positive effect (coefficient = 0.23, p = 0.058), suggesting its potential to contribute to long-term growth. In contrast, manufacturing and capital investments did not show significant long-term effects on GDP. Labor force participation also had no measurable long-term impact on growth. In the short run, the results highlighted some volatility. Changes in industry had a marginally significant negative effect on GDP (coefficient = -0.605, p = 0.052), reflecting adjustment costs, while manufacturing exhibited a marginally positive influence (coefficient = 0.283, p = 0.061). Construction’s short-term effect was insignificant, emphasizing that its benefits are predominantly long-term. This study revealed the critical role of the construction and industry subsectors in driving long-term economic growth in Uganda while highlighting the limited contributions of manufacturing and other factors of production. To achieve sustainable economic growth, policy interventions should focus on maximizing the positive effects of the construction and industry subsectors while addressing inefficiencies and fostering growth in manufacturing. These insights provide a roadmap for aligning industrial policies with Uganda's economic development goals.