Spearheaded by the increased strength of Kenya, Tanzania, and Rwanda’s national economies, East Africa has become the fastest growing region of the continent in recent years. However, the impact of the COVID-19 pandemic coupled with the Russian invasion of Ukraine has derailed the region’s growth trajectory. Rising food prices have become a key area of concern regarding food security, especially as the region is grappling with drought. An estimated 55 million people in East Africa are expected to be food insecure, up from 42 million in 2021 (World Bank, 2022).
Nevertheless, the agriculture, construction, and energy sectors in East Africa offer the potential to yield inclusive growth. The rise in global oil prices has resulted in greater interest in Africa’s gas reserves as sources of energy alternatives; the liquified natural gas project in Tanzania has sparked renewed investor interest. Equally, Kenya’s underdeveloped mining sector is experiencing growth from 10.9% of GDP in 2021 to 22.6% in 2022.
Recovery paths across East Africa have been uneven. Tanzania has been an anomaly through these ongoing crises as its GDP is forecast to reach 5% in 2022 up from 2% in 2020 (AfDB, 2022). Kenya’s agriculture sector, which accounts for 20% of its economic output has demonstrated considerable volatility and remains vulnerable to climate change. Additionally, political fragility and instability such as the escalation of fighting in northern Ethiopia and the political uncertainty accompanying regional elections could hinder private sector business activity. In Rwanda, the inflation rate is forecast to be pushed up to 16% in response to rising food prices causing hurt to consumers’ pockets. The road to recovery for economies across the region will be long and uncertain.
Speakers:
East Africa Director | Meridiam
Partner, Africa | Control Risks
Managing Director, East Africa | GCR Ratings