Weaker Ugandan shilling poses threat to Kenya exports

Growth in the region has generally been susceptible to fluctuations in world output growth.

Capital flows

“During global slowdowns, the EAC has generally been affected by reduced external demand for its exports, deteriorating the terms of trade prompted by declines in global commodity prices.
At times, the region has also been affected by tighter financial conditions abroad, particularly during episodes of financial crisis,” said the document titled: Spillover Effects and the East African Community; Explaining the Slowdown and Recovery.

It further said in part: “Global financial conditions have recently deteriorated to levels not seen in more than two decades.

As a result, a reduction or reversal in capital flows to the region, including foreign direct investment (FDI), is constraining investment and dampening growth prospects,”

The African Economic Outlook report says the prevailing global crisis has weakened growth in Africa cutting GDP growth by more than half, from an earlier projection of 5.7 per cent to 2.8 per cent in 2009.

The average growth rate for East Africa had been projected at 7.3 per cent in 2008, down from a very strong 8.8 per cent in 2007 but is expected to stand at 5.5 per cent in 2009.