Eastern African economies expect strong recovery in 2021

Thirteen economies in Eastern Africa are poised for a robust recovery by the end of the year, with the African Development Bank forecasting a recovery of 4.1 per cent in 2021 and a further 4.9 per cent in 2022. Nenna Lily Nwabufo, AfDB’s Director General for East Africa, joined CNBC Africa to discuss the region's economic outlook. Despite the positive predictions, there are still downside risks that need to be considered. The global rise in oil prices poses a threat, particularly for non-oil exporting countries in the region. Slow structural transformation continues to be a challenge across many Eastern African countries, and the looming possibility of new waves of COVID-19 remains a concern. However, efforts are being made to navigate these challenges and drive economic growth. Nwabufo highlighted the importance of expanding fiscal space and preventing further debt accumulation to support growth. She emphasized the need for countries to focus on growth-enhancing public spending, bolstering private sector support, and implementing prudent financial management measures. The region is expected to see a rebound in the economy over the next three years, with a medium-term plan in place to address key economic issues. Additionally, the allocation of Special Drawing Rights (SDRs) to countries in the region is expected to bolster balance of payments and government budgets, indirectly supporting private sector development and infrastructure financing. Nwabufo underscored the importance of governance reforms, revenue diversification, and fostering public-private partnerships to drive economic growth. Ethiopia, a historically strong performer in the region, is facing challenges due to internal conflicts that could impact economic development. However, other countries like Kenya, Rwanda, Djibouti, Tanzania, and Uganda show promising growth prospects. The region's diversified economies and sectors, such as oil in South Sudan and tourism in Seychelles, are expected to help mitigate the impact of reduced growth in Ethiopia. Overall, while challenges persist, East Africa's economic recovery outlook remains positive, with various countries poised for growth and contribution to the region's overall economic performance.