Economists back E. Africa to emerge from crisis faster

Eastern Africa is set to outpace the rest of the continent in the race to recover from the effects of the global economic downturn despite suffering higher inflation figures than other African regions, economists say.

Projections by the African Development Bank (AfDB) indicate that the region led by the Kenyan economy will register an average economic growth rate of 5.4 within the next year compared to an Africa average of four per cent.

According to AfBD, Kenya is expected to exhibit strong growth in 2009 — five per cent — due to the recovery of domestic demand after a slowdown in 2008.

Dr Louis Kasikende, the bank’s chief economist, told Business Daily in Senegal that while many African countries are heavily reliant on one form of export commodity mainly in agriculture, the Eastern Africa continues to diversify income generating streams while exploiting opportunities in regional markets.

Barring the political risks that plague the Kenyan economy, Dr Kasikende said that diversity in foreign exchange income streams that aren’t tied to commodity exports place the country as a fast growth case even in the current economic slowdown.

“The diversity in markets within the region [Eastern Africa] especially in the Kenyan economy which has exploited the region’s economies to capitalise on trade ties bode well for the economy,” said Dr Kasikende at the annual AfDB conference themed Africa and the Financial Crisis: An Agenda for Action.

The organisers are hoping for a collective action on the crisis among African countries.

Supported by a recovering tourism sector, robust financial services sector, and penetrative telecommunications industries as well as strong manufacturing, building and construction sectors, the Kenyan economy is poised to outshine a lot of the continent’s established economies.

But even then, the projections for growth in 2009 remain gloomy as the effects of last year’s political violence trickle down and force firms to adjust earnings forecasts downwards while bracing for a slow year.

Yet despite the bleak outlook for 2009, the Kenyan economy’s ability to have more than one income compares favourably with the neighbours.

Kenya’s largest export destination for instance is neighbouring Uganda with the country deriving most of its foreign exchange from trade within the Comesa region.

As the main economic hub in the Eastern Africa region, Kenya’s industries are among the most established and is a source of key goods for neighbouring countries.

Ethiopia, Rwanda, Sudan, Tanzania, and Uganda— which were the fastest growing economies in East Africa in 2008 — are projected to maintain moderate growth in 2009 and 2010 because demand for their major agricultural and horticultural exports is less sensitive to the effects of the crisis.

Trade barriers
What economists agree is that while Africa may be the hardest hit as the global economic slowdown spells doom for commodity-dependant countries, a chance has presented itself for the continent to come out stronger than ever before.

“Trade barriers among African countries are much higher than when we trade with other countries outside the continent, we cannot keep blaming the rest of the world for this,” says Javier Santiso, director and chief development economist of the OECD Development Centre.