Economic growth in East Africa is set to significantly recover in 2024, with an average increase of more than 6.3 percent, recent studies indicate.
Apparently, this advance will be almost double the entire continent’s expected GDP growth rate of 3.3 percent, during the same period.
At least, this is according to the just released fourth volume of the East Africa Macroeconomic Publication, published by Deloitte under the theme of ‘Cautious optimism amid economic turbulence’.
The publication covers six East African economies, namely, Kenya, Ethiopia, Rwanda, Tanzania, Uganda, and the Democratic Republic of the Congo (DRC) as the new addition.
This year’s publication provides a comprehensive overview of the current economic landscape in the region with a focus on the key themes shaping the outlook for the coming year.
“East Africa remains the fastest-growing region in Africa despite an expected slowdown as 2023 closes, largely on account of a challenging start to the year…
… Countries in East Africa were hit by multiple shocks ranging from currency depreciation, a higher cost of living due to high inflation, debt distress, political instability, and drought,” Deloitte Africa Economic Advisory Leader Tewodros Sisay stated.
Commenting on the East Africa macro-economic environment, Sisay noted that the residual effects of these challenges continued to plague the East African countries and have posed macroeconomic headwinds.
“The region is estimated to have grown by 5.7 percent in 2023, lower than the 6.1 percent growth which was recorded in 2022,” he pointed out.
This will be supported by a full recovery of the services sector, improved export performance, and a recovery in private consumption.
“However, we remain cautiously optimistic as debt sustainability, rising debt service costs because of currency depreciation and the global economic slowdown could affect the region’s expected economic growth,” Sisay added.
Africa’s public debt as a percentage of GDP is expected to remain elevated at 65.4 percent in 2023, given the fiscal impacts of the Russia-Ukraine war, the global economic slowdown, and exchange rate depreciations experienced in some African countries.
The African continent is also approaching a maturity wall on its Eurobonds beginning in 2024.
As a result, most African countries may struggle to tap into international markets to roll over maturing debts.
This implies that most African countries may form part of International Monetary Fund (IMF) programs with fiscal adjustment policies, which may make it difficult to achieve sustainable debt and external balances.
Average inflation in the East Africa region is expected to increase for the second consecutive year, rising from 13 percent in 2022 to 14.5 percent in 2023 primarily driven by high food and energy prices and currency depreciation.
The inflationary pressures are expected to ease in 2024 as global supply chain disruptions subside.
Gladys Makumi, the Deloitte East Africa Financial Advisory Leader said East Africa has an immense potential to overcome its socio-economic challenges through trade and investment.
She added that regional integration will continue to play a key role in East Africa’s economic growth.
“We expect the continued progress in the East Africa Community through a customs union and implementation of a monetary union will support the recovery in the export of goods and services.
East African countries will also benefit from the African Continental Free Trade Area (AfCFTA) as growth in trade is expected to spur demand for production capacity and regional infrastructure, enhancing trade and overall integration.”
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