Posted on November, 1, 2021 at 08:33 am
The East Africa Economic Outlook 2021 report reveals the region’s economic growth is expected to recover to an average of 4.1 per cent in 2021 and further to 4.9 percent and 5.6 percent in 2022 and 2023 respectively, from the 0.4 percent posted in 2020.
Kenya has already rolled out a new stimulus plan to bolster economic recovery which is projected to grow by 6pc. Others are Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania, and Uganda.
The report attributes the slowdown in 2020 to COVID-19-containment measures such as lockdowns and curfews and reduced external demand for exports of raw materials and lower tourism inflows.
Shocks like floods and desert locust invasions affected the performance of the agriculture sector. Contraction of economic activity hit businesses and livelihoods hard, increasing poverty and income inequality.
According to the report, published under the theme, “Debt Dynamics in East Africa: The Path to Post-COVID Recovery”, the rapid economic recovery of the region will be driven by sustained public spending on infrastructure, improved performance of the agricultural sector, and increased regional economic integration.
“The region’s resilience during 2020 was due to relatively higher economic diversification in the region and the swift policy responses initiated by governments to counter the impact of the pandemic,” said Nnenna Nwabufo, the Bank’s Director General for East Africa.
“A mix of policy interventions is needed to accelerate East Africa’s economic recovery and build post-COVID-19 resilience. These include scaling up vaccination, designing and implementing economic stimulus packages and stabilising public debt by dealing with debt related to state enterprises, among others” the Director General pointed out.
The contraction of economic activities, increase in fiscal deficits due to high public spending to respond to the COVID-19 pandemic amidst reduced public revenues, and exchange rate depreciation following a reduced income from commodity exports created fiscal and debt distress risks in the region in 2020.
Three of the 13 countries in the region are in debt distress and five others are at a high risk of external debt distress.
The report points out that better economic governance is needed to stabilize and reduce the public burden in East Africa. Other key actions include improving debt management and transparency and dealing with debt related to state-owned enterprises and contingent liabilities in some of the region’s largest economies.
The Bank’s report names political fragility across the region as one of the biggest downside risks to growth outlook.
Other risks include limited economic diversification and over-reliance on largely unprocessed commodity exports.
Source: KBC