Tanzania's President John Magufuli delivers a speech during a political
rally on July 14, 2015 in Dar es Salaam. Economist predicts that
politics in Tanzania will have an impact on economic activity this year.
PHOTO | EMILE COSTARD | AFP
East African economies are expected to take a hit from the
damaging locust invasion, excessive rainfall and election fever in
Tanzania and Uganda, Standard Chartered Bank’s chief economist for
Africa and Middle East, Razia Khan, has warned.
While
bumper agricultural production is tipped to be a key growth driver for
Kenya, the locust menace has created a near-term uncertainty on the
final harvest of the crop that is nearing maturity across the country.
Rising
political temperatures are expected to slow down economic activity in
Tanzania and Uganda ahead of presidential elections in 2020 and 2021
respectively, particularly foreign investment.
“Although
the full impact of the regional locust invasion is difficult to assess,
food prices have already been pressured higher,” said Ms Khan.
“In
Uganda the delay in final investment decision on oil and elections will
weigh on the economic prospects. We are going to see a big focus on
political risks on the part of investors. In Tanzania, politics will
also have an impact on economic activity, while locust invasion adds to a
near-term insecurity in Kenya.”
StanChart analysts lowered their 2020 growth forecast for Uganda to six per cent from 6.2 per cent.
Higher inflation
They project
that Tanzania’s economy will slow down to 6.5 per cent this year from
6.6 per cent in 2019, with a higher inflation target of 4.2 per cent
from 3.4 per cent in the same period.
In Kenya
StanChart expects the economy to grow at 5.8 per cent, the same rate as
last year, on the premise that the private sector will find it easier to
access funding from banks after removal of interest rate controls.
“...a
more favourable credit growth environment should boost activity,
creating more business demand for borrowing,” said Ms Khan.
According
to the Institute of Chartered Accountants of England and Wales the
region’s average economic growth is expected to ease slightly to 6.1 per
cent from 6.3 per cent last year.
According to the
consultancy firm Deloitte, economic growth in East Africa is expected to
moderate to 6.4 per cent in 2020 from 6.3 per cent in 2019.
“Despite
these declining growth forecasts, East Africa continues to outperform
other African regions with Africa’s fastest-growing economies (Ethiopia,
Kenya, Rwanda and Tanzania) remaining in that region,” the firm says.
Ethiopia’s economy is forecast to moderately slow to 7.2 per cent in 2020 from 7.4 per cent in 2019.
The
Central Bank of Kenya (CBK) Governor Patrick Njoroge last year
criticised the structure of the country’s economy for delivering
economic growth without jobs and a rise in incomes.
Dr
Njoroge said households have not benefited from the growth in the gross
domestic product (GDP), adding that increased infrastructure spending
has not spread wealth among working Kenyans.
Dr Njoroge is, however, more bullish now, following the scrapping of interest rate controls.
CBK
projects that Kenya’s economy will grow by 6.2 per cent in 2020, up
from 5.7 per cent in 2019, predicated on the recovery of agriculture and
the medium and small-sized businesses.
CBK last week
lowered its policy rate for the second time following the scrapping of
rate caps in November last year, cutting the central bank rate (CBR) by
0.25 percentage points to 8.25 per cent from 8.50 per cent, to allow
credit flow to the private sector.
The CBK last November cut its benchmark lending rate to 8.5 per cent from nine per cent for the first time since May 2018.
Kenya’s economy expanded by 6.3 per cent in 2018 from 4.8 per cent in 2017.
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