Poor governance and continuous harsh climatic condition hinder EAC economy growth

NAIROBI, Kenya - The economic growth within the East African region will decline further this year due to poor political instability, harsh weather conditions, and decreasing agricultural yields.

According to a new report dubbed Macroeconomic Outlook Report for East Africa Volume III, by Deloitte -a tax advisory firm. Deloitte forecasts a decline to 5.3 percent compared to 6.4 percent in 2021 but up from 3.1 percent in 2020.

This new report covered Kenya, Ethiopia, Tanzania, Uganda, and Rwanda where it shows that the region’s Gross Domestic Product (GDP) has been heavily impacted by the political instability in Kenya and Ethiopia – the major economic growth drivers in the region – and reduced agricultural sector growth.
The region’s inflation is forecast to increase to 8.6 percent in 2022 from 7.7 percent in 2021 which is largely driven by high prices of food and energy.
Dubbed ‘Resilience through tough times’ it shows that sanctions imposed on Russia have led to supply chain disruptions and export restrictions to the East African economies, manifested through rising inflation, which is expected to last the duration of the conflict.

The countries within the region are net importers of wheat and other products from Russia. They are expected to experience a two-fold upward pressure on prices, driven by supply-side shortages and global inflationary movements.

The region’s monthly price of the local food basket increased by 39.3 percent to $17 per capita across the EA countries in May 2022, from $12.2 in the same period in 2021.

Globally, inflation is expected to increase to 9.2 percent in 2022 from 5.3 percent in 2021, largely on high energy and food inflation.

These effects are expected to see global real GDP growth wane to 3.2 percent in 2022 from 6.1 percent in 2021.

Prospects of a recovery in the global output in 2022 have been dimmed following the materialization of higher-than-expected inflation, especially in advanced economies.

Last year, foreign direct inflows to the region increased by 34.9 percent to $8.2billion from $6.1 billion in 2020 when the Covid-19 pandemic weighed heavily on investment.

GAROWE ONLINE