Kenya’s Economy to grow fastest than other economies in East Africa

An outlook by Deloitte, an audit and consultancy firm has shown that Kenya’s economy will recover faster from Covid-19 compared to other countries in the East African region. The outlook showed that the fast recovery will be accelerated by Agriculture, Tourism and Manufacturing. 

According to the World Bank, East Africa’s economy is generally expected to grow by 3% by the end of 2021. Initially, Kenya’s economy was expected to grow by 6.8% but the World Bank slashed the percentage to 4.5%. 

However, Deloitte’s outlook has shown that Kenya’s and Uganda’s economy will recover faster at 6.3% in 2021. These two countries will recover from slower growth of 0.6% and -2.1%. On the other hand, Tanzania’s growth prediction has been lowered to 2.7% from 4.8% that was expected last year.  

Ethiopia’s economy is also expected to grow by 4% from a slower growth of 3.5% last year. Additionally, Rwanda is expected to grow by 3.2% from a slower growth of -0.2% last year. 

Growth Accelerators

Deloitte, in its update on Covid-19’s economic impact on the East African Region named ‘Navigating New Realities’ said private consumption and domestic demand will highly drive the growth.  According to the outlook, 3 main sectors that were greatly hit by the pandemic are the ones that will accelerate the growth: Agriculture, Manufacturing and Tourism

East Africa is a hit bed for Tourism and due to Covid-19, the region is estimated to have lost USD 4.8 Billion in International Tourism. This is due to the measures put in place to slow the spread such as ban of International Flights. 

In Kenya and Tanzania, Agriculture helped cushion the effects of the pandemic due to a sustained demand in coffee and horticultural products. 

The outlook also shows the growth will also be fueled by an increase in private-sector investment, with long-term effects of foreign direct investment (FDI) diversification projected, despite a 9.6% drop in FDI inflows into the East African region in 2020.

Continued effect of Covid-19 on East African Macroeconomic environment 

Deloitte East Africa financial advisory leader Gladys Mukami cautions that slow vaccination rollout across the region, lockdowns, transportation restrictions, and budgetary limitations in some of the region’s main economies will all have a detrimental impact emphasizing that the virus threat is far from over. 

Despite the pandemic killing over 150,000 people in Africa and causing the continent’s economy to fall by 2.1 percent, governments have mainly stayed resilient and continue to talk about a new route to recovery as we enter Q3 of 2021.