* Economic growth seen at 6.7 percent in 2010, 7 percent in
2011

By Elias Biryabarema

KAMPALA, Aug 17 (Reuters) - Uganda's economy may expand by
6.7 percent this year before reaching 7 percent in 2011, fuelled
by growing private consumption and public expenditure, a Reuters
survey forecast on Tuesday.

East Africa's third largest economy has enjoyed a decade of
strong growth on the back of a boom in its key service,
construction and retail sectors, bolstered by stable
macroeconomic policies. It expanded at a rate of 5.8 percent in
the 2009/10 (July-June fiscal year.

"We expect the Ugandan economy to be one of the best
performing in East Africa thanks to strong private consumption
and rising government expenditure ahead of the elections," said
Alan Cameron, an economist at Business Monitor International.

Uganda is due to hold presidential and parliamentary
elections early next year. President Yoweri Museveni is widely
tipped to stand for a fourth term and would face his greatest
challenge yet from a more unified opposition, political analysts
say.

The stakes are raised with Uganda poised to become a top 50
oil producing nation with estimated reserves of 2 billion
barrels in the Albertine basin.

"(The) development of the country's burgeoning energy sector
... if managed correctly, stands to fundamentally change the
nature of the economy," said Janine Botha, a senior economist at
NKC Independent Economists.

Commercial production is due to start in the final quarter
of 2011, with output seen increasing to 200,000 barrels per day.

Uganda's fiscal deficit is seen widening to 4.1 percent of
gross domestic product in 2011 from 3.8 percent this year,
according to the Reuters poll of analysts.

Analysts forecast Uganda will continue running current
account and fiscal deficits in the short run before oil
eventually stabilises the current account.

PRICES TICK UP

The poll showed the current account deficit narrowing to 6.1
percent next year from 6.3 percent in 2010. For 2011, the
strongest forecast for the deficit was 3.8 percent while the
weakest was 10.1 percent.

"Uganda will continue to record current account deficits
over the 2010-11 period on account of a widening of the
structural trade deficit underpinned mainly by an increase in
largely oil-related infrastructure imports," said Botha.

Consumer prices in Uganda are expected to tick up over the
next 18 months and analysts said food costs would be a key
influence. The median forecast for end 2010 was 5.3 percent,
accelerating to 8.0 percent by the end of 2011.

"Inflation has been falling rapidly as a result of declining
food prices, and while this is generally positive, it is not
entirely sustainable," Cameron said.

Uganda's headline inflation rate peaked around 14 percent in
late 2008 off the back of runaway food prices before starting to
retreat in the second half of 2009. It hit a low of 3.2 percent
last month.

"Core inflation has already begun to rise, as will the
headline figure once the high base effects of 2008-2009 have
faded," Cameron said. Uganda's core inflation excludes food,
energy and metered water.
(Editing by Richard Lough and Andrew Heavens)