The African Development Bank (AfDB) has released a report which forecasts that Rwanda will experience the highest GDP growth in East Africa in 2024.
The AfDB report, titled "Mobilising Private Sector Financing for Climate Change and Green Growth," predicts that Rwanda's GDP will grow by up to eight percent in 2024, leading the region, followed by Uganda with up to seven percent growth and Kenya with up to six percent growth.
Rwanda's growth momentum is expected to be sustained by improved institutional performance, supported by policies aimed at enhancing investments and building resilience across various sectors.
Despite facing challenges in recent years, Rwanda has remained one of the top performers in Africa. The country experienced a decline in real GDP growth from 10.9 percent in 2021 to 8.2 percent in 2022. The drop in GDP growth during this period was attributed to rising international commodity prices and poor harvest.
The impact of these factors led to increases in energy, transport, and food prices, resulting in a significant rise in inflation from 0.8 percent in 2021 to 17.7 percent in 2022. In response, the government implemented measures such as subsidies on fuel, fertilizer, seeds, and public transport, as well as increased spending on social protection and school feeding programs.
The AfDB report also highlights that overall, East African economies are projected to grow at a higher rate compared to their continental peers. The region's economic growth is estimated to accelerate to 5.1 percent in 2023 and 5.8 percent in 2024, driven largely by growth in Uganda, Ethiopia, Kenya, Djibouti, and Tanzania in that order.
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However, the report cautions that political uncertainties and global shocks could potentially threaten this positive economic momentum. It specifically points out that the ongoing conflict between Sudan's military and the country's main paramilitary force poses a threat to regional stability and may lower the projected growth rates.
In addition to these challenges, the report identifies several external and domestic downside risks that could impact the positive economic outlook. External risks include a global economic slowdown, rising commodity prices, geopolitical tensions like Russia's invasion of Ukraine, international trade policies, exchange rate depreciation, and potential resurgences of Covid-19.
Domestically, gaps in infrastructure, conflicts, political instability, macroeconomic imbalances, and the adverse impacts of climate change are potential risk factors.
To mitigate these risks and maintain the positive outlook, the report calls for new policy initiatives by East African governments and stakeholders in the short, medium, and long terms to build resilience in the region's economy.
