Why EAC economies are set to rebound in 2024

Arusha. Economic growth in East Africa is expected to rebound next year, increasing by an average of 6.3 percent.

This will be supported by full recovery of the services sector, private consumption and improved export performance.

The region’s growth will be almost double Africa’s projected GDP growth rate of 3.3 percent.

The promising economic landscape for the region is contained in a report released by the international consultancy Deloitte.

The 2023 East Africa Macroeconomic Publication Volume 1V covers Tanzania, Uganda, DR Congo, Kenya and Ethiopia.

Themed Cautious Optimism Amid Economic Turbulence, the report gives a current comprehensive overview and the outlook for 2024.

Commenting on the East Africa macro-economic environment, Deloitte Africa economic advisory leader Tewodros Sisay noted, “East Africa remains the fastest growing region in Africa despite an expected slowdown as 2023 closes.”

The slowdown has been attributed to multiple shocks ranging from currency depreciation, a higher cost of living due to high inflation,debt distress and drought.

“The residual effects of these challenges continued to plague the East African countries and have posed macroeconomic headwinds,” said the report’s summary seen by The Citizen.

The region’s economy is estimated to have grown by 5.7 percent this year, lower than the 6.1 percent growth recorded in 2022.

“Economic growth in East Africa is expected to rebound in 2024, increasing by an average of 6.3 percent,” Mr Tewodros said.

However, he noted that economic analysts will remain “cautiously optimistic” on debt sustainability and rising debt service costs.

This, according to him, was due to the fact that currency depreciation and the global economic slowdown “could affect the region’s expected economic growth”.

The report further said Africa’s public debt as a percentage of GDP is expected to remain elevated at 65.4 percent in 2023.

That is given the fiscal impacts of the Russia-Ukraine war, the global economic slowdown, and exchange rate depreciations experienced in some African countries.

The African continent is also approaching a maturity wall on its Eurobonds beginning in 2024.

As a result, most African countries may struggle to tap into international markets to roll over maturing debts.

This implies that most African countries may form part of International Monetary Fund (IMF) programs with fiscal adjustment policies “which may make it difficult to achieve sustainable debt and external balances”.

Average inflation in the East Africa region is expected to increase for the second consecutive year.

Deloitte says it rose from 13 percent in 2022 to 14.5 percent in 2023 primarily driven by high food and energy prices and currency depreciation.

The inflationary pressures are expected to ease in 2024 as global supply chain disruptions subside.

Deloitte East Africa financial advisory leader Gladys Makumi noted, “East Africa has an immense potential to overcome its socio-economic challenges through trade and investment.

“Regional integration will continue to play a key role in East Africa’s economic growth,” she said.

Ms Makumi was optimistic that implementation of the East African Community (EAC) protocols such as the Customs Union and the Monetary Union will support the recovery in the export of goods and services.

East African countries will also benefit from the African Continental Free Trade Area (AfCFTA) as growth in trade is expected to spur demand for production capacity and regional infrastructure.

Deloitte is a global provider of audit and assurance, consulting, financial advisory, risk advisory and tax and legal services to selected clients.

It has a global aggregate revenue of $64.9 billion and a network of member firms in more than 150 countries, territories and six continents throughout the world.