Effects of the Ukraine crisis have slowed down Uganda's economic recovery after the lifting of COVID-19 restrictions had provided hope, the country's central bank has said.

Bank of Uganda in a statement issued here on Thursday said the conflict coupled with the supply and demand imbalances that were caused by the COVID-19 are the main underlying sources of broader price pressure.

New figures by the bank show the country's annual headline inflation and core inflation rose to 6.3 percent and 5.1 percent in May 2022 from 2.7 percent and 2.3 percent in January 2022.

The annual headline and core inflation are now forecast to average to 7 percent to 6.1 percent respectively in 2022, which is higher than earlier projections.

Inflation is projected to peak in the second quarter of 2023 before gradually declining to stable around the medium-term target of 5 percent by mid-2024.

The bank said it will continue to increase the Central Bank Rate (CBR) until inflation is firmly contained around the medium-term target.

The bank on Thursday announced an increase of the CBR to 7.5 percent from 6.5 percent in efforts to control the rising inflation.

Economic growth is now projected to grow at 4.5-5.0 percent in 2022, which is lower than the previous projection of 5.5-6.0 percent as of April 2022.

The risk to the growth outlook, according to the bank, includes weaker global growth, escalation of geopolitical conflicts, persistent global supply chain disruptions, heightened global economic uncertainty and higher inflation.

Despite the risks, the bank said in the medium term, the economy will grow at 6-7 percent supported by public and private investments in the oil sector.