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Kenya plays catch-up in race for EAC dominance

By Dominic Omondi | Published Thu, October 12th 2017 at 00:00, Updated October 11th 2017 at 21:53 GMT +3

Ethiopia, whose economy recently overtook Kenya’s, is now the fastest-growing economy in sub-Saharan Africa, according to a new World Bank report.

This means Ethiopia’s economy will further stretch its lead on Kenya’s even as the latter grapples with economic headwinds, including heightened political temperatures that have left investors jittery.

“Ethiopia is likely to remain the fastest-growing economy in the region,” noted the Africa’s Pulse Report released yesterday.

The International Monetary Fund (IMF), another Bretton Woods institution, projects Ethiopia’s economy to grow by 8.5 per cent this year, three percentage points higher than Kenya’s, which is expected to grow by five per cent.

The Bretton Woods institution noted the growth came about despite the expected slowdown in public investment.

Ethiopia’s economy overtook Kenya’s, with the country’s Gross Domestic Product (GDP) - or the total value of goods and services produced annually - hitting Sh7.4 trillion last year compared to Kenya’s Sh7 trillion in the same year.

And although the report projects Kenya’s growth to recover as inflation eases, recent developments on the political front have left the country’s economy in a precarious position.

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Already, GDP growth in the second quarter of this year slowed, growing by five per cent compared to 6.3 per cent in the same quarter last year as agriculture, manufacturing and financial services all took a beating.

It was the slowest Q2 growth since 2012 when the economy expanded by 4.3 per cent. A drought, which swept across the whole of the Horn of Africa, is to blame for depressed harvests, thus a contraction in agriculture, but a charged political environment has generally pushed investors to adopt a wait-and-see attitude. Economists have since observed that should this trend continue, Tanzania will also overtake Kenya to become the second largest economy in the region.

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