East Africa will record the highest regional economic performance on the continent in 2023 and 2024, with growth figures above 5%, according to the African Bank’s East Africa Economic Outlook 2023. recently published development.
The report, launched on Thursday July 27, forecasts that medium-term economic growth in the region will accelerate to 5.1% in 2023 and 5.8% in 2024, outpacing all other African regions. This growth will be largely driven by growth in Rwanda, Uganda, Ethiopia, Kenya, Djibouti and Tanzania.
The sector contributed 2.0 percentage points to GDP growth, less than 2.5 percentage points on average for the period 2015-2021.
The region’s natural and cultural attractions attract tourists from around the world, creating demand for services such as accommodation, dining and entertainment.
THE East Africa The region, however, faces several negative external and internal risks that could affect the positive economic outlook.
These include the global economic slowdown, rising commodity prices, the continued Russian invasion of Ukraine, international trade policies, tightening global financial conditions, exchange rate depreciation and of a resurgence of COVID-19.
“National risks include infrastructure gaps, domestic conflict and political instability, macroeconomic imbalances and the adverse effects of climate change,” the report said.
Need for private sector participation, policy and regulation
The annual flagship product Africa Economic Report of the African Development Bank offers an assessment of the region’s recent macroeconomic performance.
The report also examines medium-term projections and risks to the region’s growth prospects, providing in-depth analysis of current issues facing the region.
The theme of the 2023 report is “Mobilizing private sector finance for climate change and green growth ».
It examines the imperatives of a green transition for Africa and the role of private sector financing.
It further presents the case for natural capital as a key source of finance for climate-compatible growth in East Africa.
Despite contributing less than 4% of total global carbon emissions, African countries face significant climate finance challenges to meet the mitigation and adaptation measures needed to combat climate change. . climate change effects.
The report highlights four common challenges facing the region’s economies, which warrant a strong and inclusive green growth agenda.
They include dependence on agriculture for livelihoods, dependence on natural resources, scarcity of energy and water. It urges East African countries to adopt green growth pathways by leveraging key sectors such as renewable energysustainable agriculture and infrastructure and forestry.
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“In 2020, East Africa was only able to cover 11% of its estimated annual consumption climate finance needs of $67.2 billion, highlighting significant challenges related to the financing gap for climate change and green growth in the region,” African development bank Director General for East Africa, Nnenna Nwabufo, said during the virtual launch session, adding: “It is obvious that at least 50% of climate finance will have to come from the private sector. »
“In the short to medium term, there is a need to amplify private sector participation in climate change initiatives through dialogue, in order to boost resource mobilization, among other interventions,” she said.
Chief Economist and Vice President of the Bank, Professor Kevin Chika Urama, called for appropriate measures regulationsincentives and support for project preparation, as well as the development of strong capital markets that could facilitate the entry and exit of domestic and international investors.
“This will require increased use of blended finance, the deployment of large-scale risk reduction mechanisms and the development of platforms allowing the private sector to invest in a portfolio of green projects rather than individual projects to diversify and manage risks. » said Urama.
Bridging the financial gap that is holding Africa back
Kenyan Cabinet Secretary for National Treasury and Economic Planning, Professor Njuguna Ndung’u, keynote speaker at the launch of the report, called on regional governments to work with development partners and uphold their side of the bargain to accelerating the pace of transformation in a region that is riddled with debt.
“The growing debt burden is holding back the growth potential of our countries, thereby increasing poverty rates and inequality,” he said.
East Africa Regional Office Senior Economist, Dr. Marcellin Ndong Ntah, noted that the region will continue to experience the highest inflation rates in Africa in the medium term, due to the debt situation, global shocks and internal conflicts, adding however that inflationary pressure is slowly easing.
He said: “Debt-related vulnerabilities will also remain high in East Africa, with exchange rate depreciation and high primary deficits exacerbating sustainability risks. » He cited Burundi, Comoros, Djibouti, Ethiopia, Kenya and South Sudan as countries at high debt risk.
Dr Edward Sennoga, Second Principal Economist at the East Africa Regional Office, said the region is blessed with natural capital that has yet to be exploited.
“The region is well placed to pursue its climate and green growth ambitions, given the size of its market; a young population that could double by 2050; green technology potential; and significant natural resource endowments.
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“There are a lot of things the region can build on. The region has significant opportunities in green growth sectors, including agriculture, energy, ICT, transport and the blue economy.
“These are investment opportunities that can help address the financing gap challenges on climate change and green growth,” Sennoga said.
Other speakers during the report presentation included Ethiopia’s Minister of State for Planning and Development, Sandokan Debebe, who also reiterated the importance of placing the private sector at the forefront of climate finance, in line with the policy recommendations of the East African Economic Outlook 2023.
Dr Rose Ngugi, Executive Director of the Kenya Institute for Public Policy Research and Analysis and Mary Ngelela Maganga, Permanent Secretary in the Office of the Vice President, Government of Tanzania, also participated in the launch.