The African Development Bank has released its latest East African Economic Outlook, predicting a slow recovery in the region in 2022 at 4.0% versus 5.1% in 2021.
The slowdown is due to the lingering effects of COVID-19; the adverse impacts of geopolitical tensions (particularly the Russia-Ukraine conflict); climate change and the devastating locust invasion, along with regional conflicts and tensions.
The report points out that due to these obstacles, the countries of the region have experienced greater inflationary pressures, particularly in food and fuel, which has led to an increase in the cost of living. This has resulted in the weakening of national currencies, floods and droughts, contraction of agricultural production; depressed commercial activity and the drop in 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 fastest growing region among the continent’s regions, according to the report. .
The report, with the theme “Supporting Climate Resilience and a Just Energy Transition”it was released on October 28, 2022.
In developing the East African Economic Outlook 2022, the African Development Bank critically studied various factors affecting growth in the 13 countries that make up the East African region. The region’s vulnerability to the impact of climate change effects, such as drought and floods, could further slow down the region’s fragile recovery.
Speaking at the launch, Tanzanian Finance Minister Dr. Mwigulu Lameck Nchemba said the report was timely, considering the current cost of living concerns every citizen in the region. The disruption of regional supply chains, public debt and public discussions about the need for pro-poor spending policies dominated the debate, Mwigulu said. He noted: “despite increased infrastructure investments, more needs to be done to accelerate sustainable infrastructure development, including renewable energy to support industrialization and catalyze inclusive growth.” He called for the mobilization of additional resources to expand access to energy, noting that the Democratic Republic of the Congo was endowed with immense renewable energy resources to light the entire continent.
The Bank’s director general for East Africa, Nnenna Nwabufo, said the vulnerability of the East Africa region to the impact of climate change effects, such as drought and floods, could further hamper the region’s fragile recovery. “This requires urgent policy measures to build macroeconomic resilience, including through diversifying economies to withstand shocks.”
Emmanuel Pinto-Moreira, Director of the Bank’s National Economy Department, highlighted the main development challenges facing the continent, in particular, high inflation, rising inflation and climate change. He stressed the need to deepen the mobilization of internal resources to finance social safety nets for the most vulnerable and climate resilient infrastructure.
Although fragile, the economic recovery is expected to be sustained in the medium term in East Africa thanks to a rebound in industrial and service activities, increased government spending, the reopening of travel and trade due to the adoption of vaccines against COVID-19, the recovery of the tourism sector, deeper regional ties under the East African Community and supportive macroeconomic policies, said Marcellin Ndong Ntah, the Bank’s Principal Economist.
Ndong-Ntah said rising debt service costs, depreciation of national currencies, macroeconomic imbalances, a protracted conflict between Russia and Ukraine, growing income inequality, political instability and vulnerability to climate change and natural disasters are key internal and external downside risks affecting the region’s medium term. economic prospects.
Dr. Rose Ngugi, Executive Director of the Kenya Institute for Public Policy Research and Analysis (KIPPRA) encouraged countries in the region to intensify their efforts to increase their annual growth rate by at least 7%, the minimum rate required to guarantee the achievement of Sustainable Development. Goals (SDGs). To do this, countries must achieve internal and external macroeconomic stability, she said.
Reflecting on the report’s theme, climate resilience, Edward Sennoga, the Bank’s Principal Economist, noted that East Africa has the second lowest resilience to climate change in Africa, and most countries in the region are also characterized by high vulnerability and low preparedness to respond to climate change. He said there was an urgent need for innovative financing approaches to close the huge gap in climate change financing.
According to the report, the climate finance gap for East Africa is estimated to average around $60 billion per year for the period 2020-2030. The report cites public-private partnerships, green bonds, partial risk and credit guarantees, carbon offsets, and regional energy trading as some of the measures that can provide alternative financing for climate change. Teddy Mugabo, CEO of the Rwanda Green Fund, echoed this perspective by emphasizing the need for innovative financial instruments and the effective use of the carbon market.
To learn more and read the East African Economic Outlook 2022 report Click here