Most East African countries have a positive economic outlook, largely due to the positive performance brought about by economic diversification. This is according to the Institute of Chartered Accountants in England and Wales’ (ICAEW) latest report, Economic Update: Africa Q1 2020.
The accountancy body provides GDP growth forecasts for various regions, including East Africa which is set to grow by 6 per cent, West and Central Africa at 3.1 per cent, Franc Zone at 4.9 per cent, and Southern Africa at 1.3 per cent.
The report, commissioned by ICAEW and produced by Oxford Economics, highlights how East Africa remains the fastest-growing sub-region, and the economic outlook remains favourable, underpinned by vigorous domestic demand and public investments in infrastructure.
Kenya’s tourism industry was highlighted as a key player in the country’s efforts to diversify its economy away from a dependence on agriculture as a key foreign exchange earner. Kenya’s medium-term tourism prospects remain robust, despite the corona virus outbreak currently being witnessed globally, supported by improvements in infrastructure, better air connectivity and easing visa regulations around Africa and the rest of the world.
“Kenya’s economic diversification strategies are increasingly buffering its economy from global shocks. More African countries, including Kenya, are prioritising the promotion of tourism as part of this plan. Ongoing investment in infrastructure projects, resilient exports and the associated benefits from regional economic integration in the sub-region will reinforce growth projections,” said Michael Armstrong, ICAEW’s Regional Director for the Middle East, Africa and South Asia.
The report goes on to highlight how the economic outlook in Kenya is moderately positive. GDP growth is projected at 5.5 per cent in 2020 amid robust private consumption, higher credit growth, and rising public and private investment. In addition, rapid urbanization and further regional integration will likely continue to open up investment opportunities.
“The East Africa regions has maintained its status as the continent’s growth hotspot in the first quarter of 2020. The region’s output, which has slightly decelerated to 6 per cent in 2020 is being kept stable by the fact that the region boasts some of the fastest growing economies globally,” the report stated.
The sluggish performance of the Nigerian economy continues to weigh on West and Central Africa’s prospects, with regional growth seen rising only marginally to 3.1 per cent in 2020, while North Africa’s growth is projected to pick up more strongly, rising from 3.1 per cent in 2019 to 3.7 per cent in 2020.
Tunisia, in particular, faced significant challenges, with growth estimated at a mere 1.3 per cent in 2019. Aside from a marked slowdown in agricultural growth, frequent protests and weaker external demand contributed to a slump in industrial activity. This was, however, partly offset by a strong rebound in tourist arrivals.
Regional powerhouses South Africa and Angola continue to weigh heavily on Southern Africa’s prospects: the region’s growth remains sluggish at 1.3 per cent in 2020, with risks firmly stacked to the downside. Power outages are taking a toll on the South African economy, and fiscal pressures mean the country could well lose its investment-grade credit rating. Angola’s real GDP, meanwhile, looks to have contracted for a fourth straight year in 2019.
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