Ethiopia to register highest growth in the region

Tuesday January 16 2018

Workers at a textile factory in Addis Ababa, Ethiopia.

Workers at a textile factory in Addis Ababa, Ethiopia. High commodities prices will spur economic growth in region. PHOTO FILE | AFP 

By ALLAN OLINGO
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Growth in sub-Saharan Africa is expected to accelerate to 3.2 per cent this year from 2.4 per cent in 2017.

But the forecast for faster growth will depend on a firming up of commodity prices and reforms.

According to the latest Global Economic Prospects (GEP) report released by the World Bank last week, growth in the region is estimated to have rebounded to 2.4 per cent last year, after slowing sharply to 1.3 per cent in 2016.

“However, despite the pickup, growth will remain below the rates seen prior to the global financial crisis, partly reflecting the struggle faced by the region’s larger economies to boost private investment,” the report says.

In the region, the economic is expected to expand at a solid pace, helped by robust investment growth. Ethiopia is expected to have the highest growth of 8.2 per cent followed by Tanzania at 6.8 per cent; Rwanda at 5.9 per cent, Kenya at 5.5 per cent and Uganda at 5.1 per cent as inflation eases.

Fastest growing economy

“Among East African countries, Ethiopia is likely to remain the fastest growing economy, but growth is expected to soften as it takes measures to stabilise government debt. Growth is expected to recover in Kenya, as inflation eases, and to firm up in Tanzania on strengthening investment growth,” the World Bank says.

The Bretton Woods institution is also warning that that excessive external borrowing without forward-looking budget management could worsen debt dynamics and hurt growth in many countries.

“Excessive external borrowing, in the absence of sound forward looking budget management, could worsen debt dynamics and cause economic instability.

Reforms to contain fiscal deficits and rebuild buffers are particularly needed in in the non-resource-intensive countries in East Africa where government debt is high and rising,” it says.

With the increase in sovereign bond issuance in recent years, a sharp increase in global interest rates could also complicate debt dynamics in the region.

In the long run, World Bank says, a sharper-than-expected slowdown in growth could damage prospects for gains in per capita incomes and poverty reduction.

Other downside risks facing the regional economies include a pro heightened political and policy uncertainty, which could further hurt confidence and deter investment. in some countries.