East Africa's economic outlook

The economic landscape in East Africa continues to evolve, with each country facing its unique challenges and opportunities. The Central Bank of Tanzania recently held its benchmark rate steady at 6 per cent during its July 2024 meeting, citing inflation expectations well below the 5 per cent target. Meanwhile, Uganda is experiencing strong private sector activity, and Kenya is grappling with the effects of the appropriation bill's ascension into law. To provide insights into these economies, Phillip Ssali, Head of Corporate Sales & Global Markets at Standard Bank Group, shared his views during a recent interview on CNBC Africa. Phillip Ssali discussed the economic outlook for Tanzania, highlighting that the country's growth is projected to be around 5 per cent, in line with government targets. Despite calls for rate cuts to spur borrowing, he emphasized that the current growth trajectory does not warrant a change in interest rates. Ssali mentioned that the Central Bank's cautious approach is justified due to lingering risk factors that could impact interest rates in the future. He also emphasized the importance of policy alignment among regional central banks to maintain stability. Shifting the focus to Uganda, Ssali addressed the recent decline in the Purchasing Managers' Index (PMI) to 51.9 in June. While private sector activity is on the rise, he explained that interest rates are primarily influenced by the central bank's inflation forecasts. Ssali pointed out that despite positive private sector growth, borrowing costs are likely to remain stable in the near term. Additionally, he discussed the performance of the Ugandan shilling against the dollar, noting that while the currency has shown strength, it is not the sole factor driving interest rate decisions. Regarding the potential impact of the Ugandan shilling's appreciation on interest rates, Ssali underscored the need to consider various inflation drivers beyond just the exchange rate. He highlighted that factors like fuel prices, utilities, and food costs play a significant role in shaping monetary policy decisions. Ssali indicated that the Bank of Uganda is unlikely to adjust interest rates based solely on currency movements and reiterated the importance of a holistic approach to inflation management. In conclusion, the discussion touched on the macroeconomic factors affecting the East African market, including the 10-year government bond yield in Kenya. With each country facing its unique set of circumstances, navigating the economic landscape in East Africa requires a comprehensive understanding of the regional dynamics and the interplay between policy decisions and market trends. As these economies continue to evolve, stakeholders will need to monitor developments closely to make informed decisions and mitigate risks in a rapidly changing environment.