AfDB projects economic growth in 13 African countries

Economies of Tanzania, Kenya, Uganda and other East African countries are projected to grow by 4.1 percent this year, up from 0.4 percent in 2020, African Development Bank (AfDB) has said. 

The bank’s East Africa Regional Economic Outlook 2021 released on October 28 says the increased growth rate in the 13 economies including Seychelles, Somalia, South Sudan, Sudan and Ethiopia is attributed to the ongoing global economic recovery.

"East Africa is the only region on the continent that avoided a recession in 2020," reads the AfDB report.

However, according to the lender, a slow rollout of Covid-19 vaccines and risks of spikes in infections that surface in the region could still dampen the positive outlook.

Despite it being a global pandemic, AfDB says Covid-19 has had different effects across the region.

Commodity exporters such as Tanzania have been slightly resilient during the pandemic due to export price increases in commodities, particularly gold.

Countries that depend highly on tourism like Seychelles and Zanzibar have been hit hardest. Kenya and other countries with more diversified economies have experienced lower impacts of the pandemic.

Generally, “East Africa is experiencing a progressive change in the composition of GDP, from predominantly agriculture to services. But the transition to higher value-added economic activities which signals structural transformation has been slow," says the AfDB.

In 2020, East Africa’s fiscal deficits widened as a result of increased public spending in response to Covid-19 amid falling domestic revenues, as domestic containment measures and disruptions in global supply chains took a toll on the region’s economies.

Still, fiscal deficits were lower than in other regions of the continent except Central Africa. In the same line, current account deficits of the 13 countries have widened as exports fell during the pandemic.

Monetary policy was accommodative to support the economic recovery and inflation remained stable and in single digits in 10 of the region’s 13 countries reflecting moderating food inflation and lower energy inflation.

The AfDB shows in its review that the global pandemic could hold back progress on reducing poverty in the region with about 134.3 million people living in extreme poverty.

The pandemic has had sharper impacts on the poor, with the Economic Outlook projecting that, “Covid-19 and related shocks have increased poverty in the region, with the share of people living in extreme poverty rising to 35 percent in 2021, or 134.3 million human beings.”

Since the start of the global pandemic, about 12.3 million people in the region representing 3.4 percent of the 2019 population fell below the poverty line.

Separate report by the International Monetary Fund showed that economy of sub-Saharan Africa is projected to grow by 3.7 percent in 2021 and 3.8 per cent in 2022, depending on the success of efforts to curb Covid-19.

IMF in its October Regional Economic Outlook for sub-Saharan Africa, One Planet, Two Worlds, Three Stories, shows that vaccination in sub-Saharan Africa has been slower than other regions due to low access to and supply of vaccines.