AFRICAN RENAISSANCE: Economic Outlook - East African Economies Show Impressive 2015 Prospects!

January 18, 2015 - EAST AFRICA - East African economies are upbeat this year as each of its member states tackle unique experiences to thrive in 2015.

From Kenya’s insecurity challenges to Tanzania’s general election, Uganda’s nascent oil industry and Rwanda’s aid flow recovery, this year heralds interesting times for these nations.

According to the World Bank’s latest report Kenya’s economy will grow by 6 per cent, Tanzania’s by 7.2 per cent, Uganda’s by 6.6 per cent and Rwanda’s by 6.5 per cent.

East Africa’s largest economy, Kenya, will however post the slowest growth. The growth will be higher than that of last year and be driven by mega-infrastructure projects like the standard gauge railway which is anticipated to contribute 1.5 per cent to the country’s Gross Domestic Product (GDP).

“We are thinking of growth between 6 to 7 per cent given the prospects this year,” Angus Downie head of economic research at Ecobank told CNBC Africa.

Nonetheless, security remains a daunting challenge for the country that has been perturbed by terrorism since 2012.

“Indeed terrorism was a big challenge in 2014, it is fair to say that if you look at key metrics in the path of the economy some of the risks have largely been priced by investors. If you look at quarter two and quarter three growth momentum in Kenya it was really reassuring,” Julians Amboko, a research analyst at Stratlink Global said.
Moreover, the World Bank also expects a recovery in the dwindling tourism sector which is reported to have contracted by about 14 per cent during the third quarter of 2014.

Meanwhile, Tanzania is said to be banking on the recent re-basing of its economy for a better 2015. Consequently, the country's GDP per capita is now 977 US dollars compared to 742 US dollars. The country became the third East African nation to rebase its figures after Kenya and Uganda.

With the rebasing of the countries, the East Africa Community (EAC) market is now estimated at 134 US billion dollars a 19.6 per cent jump from 2013. This is excluding economic growth in the last year.

Amboko believes that Tanzania will continue to register strong macro-economic performance.

“It will be an interesting year for Tanzania because they have the constitutional referendum coming just before the general elections… Nonetheless, Tanzania has had a very robust economic growth momentum in the recent of 7 per cent in the last five years,” Amboko noted.

Tanzania’s set to hold its general elections in October. However, there is alleged electoral fraud and worry over political instability.


WATCH: East Africa economic outlook.

As for Uganda, its economy which is anticipated to grow by 6.6 per cent will be analysing its budding oil industry despite the drop in oil prices globally. The country is targeting 2016 as its year of production.

“As of August last year Uganda oil reserves shout up by about 87 per cent to 6.5 barrels and therefore it will be a pivotal sector if it indeed rolls out by 2016,” Amboko said.

However, Sarah Warren a structured trade Transactor at RMB says that Uganda may not bear the burden the negative impact of oil prices like other countries that are already producing oil.

“Oil producing communities obviously are the losers in this situation but if you look at the East Africa community with the exploration progress of oil and gas, there could be some positive and negative impacts of the low oil price,” Warren said.

The country’s central bank said that Uganda will be able to achieve a growth rate of more than 6 per cent if it is able to achieve high public investments in infrastructure, raise private sector credit growth, and increase Foreign Direct Investment (FDI) among others.

On the other hand, Rwanda is seeking to re-ignite its economic mojo from delays in budgetary support from donors.

“Rwanda has had a challenge in terms of its economic momentum given the 2012-2013 donor aid shock and therefore the focus right now is how to catalyze domestic investements,” Amboko explained.

According to the World Bank, future growth for the East African country is expected to hinge on domestic resource mobilization and transformation in driving private sector–led growth.

The country has often registered an impressive GDP growth of 8 per cent. - CNBC Africa.

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