26 February 2013

East Africa: Region to Grow At 6.3 Percent in 2013

Kampala — Eastern Africa is expected weather down the global economic effects to post an economic growth rate of 6.3% in 2013, an economist has said.

Mr. Andrew Mold, a Senior Economist and Head of the Macroeconomic and Social Policy Analysis Cluster (Sub-regional office for Eastern Africa) at the United Nations Economic Commission for Africa (UNECA) said that the region is bouncing back economically but a few issues need to be sorted out so as to sustain that growth.

He said that the prospects were bright for the region to bounce back from the 5.7% growth in 2012 but that the downside risks to the region's growth are the upcoming elections in Kenya, the instability in Eastern DRC, South Sudan' conflict with the Sudan over oil revenues.

Mold added that Rwanda is expected to grow at 7.6% in 2013 from 7.7% in 2012, Tanzania at 7.1% in 2013 from 6.8%, Uganda at 5.5% from 4.6%, Kenya at 5.4% from 3.8% in 2012 while Burundi on the other hand is expected to grow 4.8% in 2013 from 4.4% in 2012.

He was addressing the press on the sidelines of the 17th Intergovernmental Committee of Experts (ICE) meeting on 'Enhancing Energy Access and Security in Eastern Africa' last week in Kampala.

He however said that a much improved economic growth performance in the Eastern African region over the last decade was not leading to a commensurate decline in poverty.

"Despite sustaining a growth rate for over a decade of around 6% per annum, the number of people living in absolute poverty in the region has increased from 155 million in 2000 to 166 million in 2011. However, incidences of poverty have gone down from 66% to 54% in the 14 countries," Mold said.

Analysis contained in 'Tracking Progress 2013 Report' shows that vibrant domestic demand is far more important for overall economic performance and poverty reduction than the export sector.

The report however notes that this does not imply that the external sector is unimportant, on the contrary, in a region afflicted by quite large current account deficits, an improved export performance is necessary (but not sufficient) condition for more resilient exclusive growth.

According to the International Monetary Fund (IMF) data Current Account deficits in 2012 as a percentage of GDP showed reflected Kenya as having -8.5%, Rwanda's stood at -9.8%, Uganda with -11.0%, Burundi at -11.4% while Tanzania's was at -15.4%.

Mold stressed that the turnaround in growth performance in the region has been very tremendous but that the region needs to clearly map out strategies for sustainability of growth over the long term.

Econometric analysis from the report that Mold presented to the participants at the week-long seminar demonstrated that higher levels of domestic saving and investment are crucial if growth is to be sustained.

"Removing constraints to saving is urgent - addressing problems such as negative real interest rates and large spreads between deposit and savings rates would go a long way in resolving some of these problems.

He however pointed out that income inequality in East Africa is high, both by regional standards and internationally.

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