The African Development Bank has released its latest East African Economic Outlook, predicting a slow recovery in the region in 2022 at 4.0 percent against 5.1% in 2021.
The slowdown is due to the lingering effects of COVID-19; the adverse impacts of geopolitical tensions (notably the Russia-Ukraine conflict); climate change and devastating locust invasion, together with regional conflicts and tensions.
The report notes that because of these obstacles, countries in the region have experienced heightened inflationary pressures, particularly on food and fuel, leading to rising cost of living. This has resulted in weakening national currencies, floods and drought, contraction in agricultural production; depressed business activity, and falling revenue collection, among others.
However, the continued reopening of economies globally could mitigate these adverse effects in 2023 with a projected growth rate of 4.7%, repositioning East Africa as the top-performer in growth among the regions of the continent, according to the report.
The report, themed "Supporting Climate Resilience and a Just Energy Transition", was launched on 28 October 2022.
In developing the 2022 East Africa Economic Outlook, the African Development Bank critically studied various factors affecting growth in the 13 countries which constitute the East African region. The vulnerability of the region to the impact of climate change effects such as drought and flooding, could further hold back the region's fragile recovery.
Speaking at the launch, Tanzania's Finance Minister, Dr. Mwigulu Lameck Nchemba, said that the report was timely, considering the current cost of living which is of concern to every citizen in the region. Disruption of the regional supply chains, public debt, and the public discussions on the need for pro-poor spending policies were dominating debate, Mwigulu said. He noted: "despite the ramp up in infrastructure investments, more needs to be done to accelerate the development of sustainable infrastructure, including renewable energy to support industrialization and catalyze inclusive growth." He called for mobilization of additional resources to expanded energy access, observing that the Democratic Republic of Congo was endowed with immense renewable energy resources to light up the entire continent.
The Bank's Director General for East Africa, Nnenna Nwabufo, said the vulnerability of the East African region to the impact of climate change effects such as drought and flooding, could further hold back the region's fragile recovery. "This calls for urgent policy measures to build macroeconomic resilience including through diversifying economies to withstand shocks."
Emmanuel Pinto-Moreira, Director of Country Economics Department at the Bank highlighted the key development challenges facing the continent, notably, high inflation, rising inflation, and climate change. He underscored the need to deepen domestic resources mobilization to finance social safety nets for the most vulnerable and climate resilient infrastructure.
Although fragile, the economic recovery is projected to be sustained in medium term in East Africa thanks to the rebound of service and industrial activities, increased public spending, reopening of travel and trade due to uptake of COVID-19 vaccines, recovery of tourism sector, deeper regional ties under the East Africa Community, and supportive macroeconomic policies, noted Marcellin Ndong Ntah, Lead Economist at the Bank.
Ndong-Ntah said that increased debt service costs, depreciating domestic currencies macroeconomic imbalances, a prolonged Russia-Ukraine conflict, widening income inequality, political instability and vulnerability to climate change and natural disasters are key domestic and external downside risks affecting the region's medium-term economic outlook.
Dr Rose Ngugi, Executive Director of Kenya Institute for Public Policy Research and Analysis (KIPPRA) encouraged countries of the region to intensify their efforts to increase their annual growth rate at a least 7%, the minimum rate required to ensure the achievement of Sustainable Development Goals (SDGs). To this end, countries should achieve internal and external macroeconomic stability, she said.
Reflecting on the theme of the report - climate resilience- Edward Sennoga, Lead Economist at the Bank, noted that East Africa has the second lowest resilience to climate change in Africa, with most countries in the region also characterized by high vulnerability and low readiness to respond to climate change. He said there was the urgent need for innovative financing approaches to bridge the huge gap in climate change financing.
According to the report, the climate financing gap for East Africa is estimated at an average of about $60 billion per year for the period 2020-2030. The report cites Public -Private partnerships, Green Bonds, partial risk and partial credit guarantees, carbon offsets, and regional energy trade as some of the measures that can provide alternative financing for climate change. Teddy Mugabo, CEO Rwanda Green Fund echoed this perspective by stressing on need for innovative financing instruments and the effective use of carbon market.
To learn more and read the 2022 East African Economic Outlook report click here
Contact:
Joyce Mulama, Communication and External Relations Department, email: j.mulama@afdb.org
