East Africa leading continent’s economic growth, says report

Economic disruptions caused by the coronavirus pandemic pushed East Africa’s growth projection for 2020 down to 1.2 per cent.

However, the growth rate outstrips other African regions, and is predicted to rebound to 3.7 per cent in 2021, according to the African Development Bank’s East Africa Regional Economic Outlook 2020.

The projection is under the baseline scenario which assumes the virus will be contained by the third quarter of this year.

Prior to the Covid-19 pandemic, the region’s economic growth was projected at more than 5 per cent, well above the continent’s average of 3.3 per cent and global average of 2.9 per cent.

Coronavirus-instigated shocks and a locust invasion contributed to job losses and increased humanitarian needs and will aggravate poverty and income inequality going forward.

Worst-case scenario

In the worst-case scenario, should the pandemic persist until the end of 2020, growth is projected to hit 0.2 per cent, still above Africa’s predicted average of -1.7 per cent and -3.4 per cent under the two scenarios.

At the launch of the report in Nairobi, Labour Cabinet Secretary Simon Chelugui, said the region can overcome the effects of Covid-19 and turn their economies around by mitigating the external and domestic risks.

“We need to implement a decisive and co-ordinated response to contain the spread of Covid-19; mitigate its health and socio-economic effects; accelerate structural transformation; improve the investment climate, and maintain the peace and security of our region,” he said.

The report indicates that Covid-19 pandemic will affect East African economies in many ways, such as falling commodity prices and trade, and restrictions on travel with a consequent negative impact on tourism.

Waning financial flows have affected the region’s fiscal and current account balances, while disruptions in supply chains have hurt food production and distribution. 

With schools closed, an estimated 90 million learners have been excluded from the classroom.

Nnenna Nwabufo, the Director General of the Bank’s East Africa Regional Office, pledged the bank’s support to steer the region out of the crisis.

“Our ambition is to address the adverse effects of Covid-19 pandemic and ensure that social and economic development across the continent is accelerated, including through the creation of an African workforce of the future,” she said.

She noted that the bank had responded swiftly to provide urgently needed support to address the immediate impacts of the Covid-19 pandemic, including support of $212 million (Sh22.7 billion) to Kenya, $165 million (Sh17.7 billion) to Ethiopia, $4 million to South Sudan and $10 million to the Seychelles.

Nwabufo called for a collective effort to address the development challenges such as Covid-19, rising public debt, and the locust invasion, in order to re-direct the nations towards a sustainable development pathway.

 The report’s authors called for urgent policy measures to cushion the effects of the Covid-19 pandemic.

External shocks

“East African countries should accelerate a real structural transformation by transitioning from low value-added production to higher value-added activities that could mitigate vulnerabilities to domestic and external shocks,” said Dr Marcellin Ndong Ntah, the bank’s Lead Economist.

As well as investigating the impact of the Covid-19 on the region, this year’s report placed particular emphasis on “Developing East Africa’s Workforce for the Future”.