The shrinking revenue from export of commodities including minerals led to a minor drop in economic growth rates across East Africa in 2018, according to the African Development Bank (AfDB).
Growth, however, is expected to gain pace in 2019 at 5.9 percent rising to 6.1 percent in 2020, said a report issued by the bank on Wednesday.
The bank’s report, measuring economic performance in 13 countries in eastern Africa, shows the real Gross Domestic Product grew by an estimated 5.7 percent in 2018, slightly less than the 5.9 percent in 2017, due to the growing current account deficits caused by low earnings from exports.
The bank projects economic growth to remain strong in 2019 at 5.9 percent, supported mainly by domestic consumption of goods and the growth in the services sector.
According to Marcellin Ndong-Ntah, AfDB Lead Economist at the regional office in East Africa, the region’s fiscal deficit, due to the low earnings from exports caused by the trade imbalance, stood at 30 percent of the national economy, which is considered under control at the moment.
However, the bank expressed concern at the growing level of foreign debt accumulation by countries which previously benefited from international debt relief, saying the effect of foreign debts accumulation by the private sector and the public sector would be felt in the near future.
Djibouti is projected to grow at 5.9 percent while economic growth in South Sudan is expected to remain at negative 3.8 percent.
Seychelles, whose economy depends on tourism and fisheries, is also expected to record a decline of 0.3 percentage points.
In Eritrea, investment in the mining sector and the government’s agriculture development programs is expected to contribute to economic growth in 2019, according to the report.
Uganda, whose economy has been growing rapidly, is expected to record 5.3 percent growth in 2019. Sudan is also expected to record a decline in economic growth rates by 0.5 percent. The growth in Sudan has been driven by the mining sector, whose contribution to the GDP is estimated at 7 percent.
According to the AfDB, real economic growth is supply-side driven by the growth in the services sector, followed by industry and the construction sector, whose contribution to the economy remains huge.
In Ethiopia, the construction industry grew by 18.7 percent while the services sector grew by 10.3 percent, according to the report.