TEL AVIV, Israel, November 16, 2021 / APO Group / –
Economic growth in East Africa is expected to pick up this year despite the decline in COVID-19 thanks to sustained public spending in infrastructure and improved performance of the agricultural sector. Growth in the bloc is expected to average 4.1 percent this year, down from 0.4 percent last year, according to the African Development Bank’s (AfDB) latest economic outlook report for the region.
The report showed that next year’s average growth is expected to reach 4.9 percent. COVID-19 containment measures and disruptions in global supply and demand have hit businesses and livelihoods hard and increased poverty, while political fragility in some countries, according to the report’s findings. and limited economic diversification in others were significant obstacles to growth.
Somali Finance Minister Abdirahman Dualeh Beileh warned when launching the report late last month that the pandemic could continue to hamper progress towards inclusive growth. “The contraction of economic activities, the increase in budget deficits due to high public spending to respond to the COVID-19 pandemic in a context of reduced public revenues and the depreciation of the exchange rate following the reduction in income of exports of raw materials, have created risks of over-indebtedness and over-indebtedness in the region in 2020 ”, declared Minister Beileh.
The flagship report reviews the socio-economic performance of 13 countries, namely Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania and Uganda. The report, titled “Debt Dynamics in East Africa: The Path to Post-Covid Recovery,” notes that the region’s rapid recovery is being driven by sustained public spending in infrastructure, improved performance of the agricultural sector and the deepening of regional economic integration. .
According to the report, as East Africa moves towards a more service-oriented economy, some countries are experiencing deindustrialization. To accelerate recovery and build post-COVID-19 resilience, the report recommends that countries accelerate structural transformation through digitization, industrialization, economic diversification and the consolidation of peace, security and stability. The outlook report predicts a full recovery from 2023, due to the increased deployment of vaccines, the recovery of the global economy, rising commodity prices and increasing economic diversification in the region.
“A combination of policy interventions is needed to accelerate East Africa’s economic recovery and build post COVID-19 resilience. These include scaling up vaccinations, designing and implementing economic stimulus packages, and stabilizing public debt by addressing debt related to state-owned enterprises, among others, “said Ms. Nnenna Nwabufo, AfDB Managing Director for East Africa.
The region’s resilience over the past year was due to relatively higher economic diversification and swift policy responses from governments to counter the impacts of the pandemic. Still, Marcellin Ndong Ntah, senior economist at the AfDB, warned that the risks to the region’s positive outlook remain substantial due to uncertainties surrounding the longevity and severity of the pandemic, the slow adoption of vaccines, the rising global oil prices for non-oil-exporting countries in the region, slow structural transformation, conflict and civil unrest, and climatic shocks and locust invasions in the region.
Mr. Emmanuel Pinto Moreira, Director of the Bank’s Country Economics Department, said many East African economies continue to need short-term debt relief and support. emergency external financing from multilateral lenders. He added that many had received budget support under the Bank’s COVID-19 response mechanism and emergency funding from the International Monetary Fund. Economic experts present at the launch called for better economic governance, including the clearance of domestic arrears, improved debt management and transparency, and the treatment of debt related to public enterprises.
“For countries with significant external financing risks, innovative financing instruments such as non-debt equity, risk sharing with the private sector, including through guarantees and increasing participation of Foreign investors in local currency debt markets should be explored to diversify sources of development finance, ”said Edward Sennoga, chief economist at the Bank.
This, he added, will protect the region’s economies from global volatility shocks. Louis Kasekende, executive director of the Institute for Macroeconomic and Financial Management of East and Southern Africa, stressed that policies aimed at diversifying sources of public finance, improving public revenue mobilization and prioritizing investments in infrastructure will be essential to ensure debt sustainability.
“Public debt, if used correctly, can help boost essential services, leading to improved economic growth,” he said. Although the sub-region avoided recession last year, political fragility and limited economic diversification have impacted growth in some countries. Until last year, when the coronavirus pandemic swept through the region, East Africa was the continent’s most dynamic economy, but it will cede its position to Central and Southern Africa this year and to North Africa next year due to the expected strong recoveries in these regions.
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