Released earlier this August, the African Development Bank’s 2023 East Africa Economic Outlook projected economic growth rates in the East African region to outpace those of all other regions in the continent over the fiscal year 2023 to 2024.
Compared to expected growth in the 1% range for Southern Africa and in the 4% range for Western, Central, and Northern Africa, the continent’s eastern region is projected by the African Development Bank (ADB) to reach 5.1% in 2023 before jumping to 5.8% in 2024. “According to the report” that the ADB conducted on the region’s prospects around a month ago, “East Africa’s real GDP was propelled by its services sector, contributing almost half of the economic growth in 2022.” Industries in this service sector include tourism, finance, and R&D in other key industries such as agriculture and energy; in total, however, the implications of the service sector’s contributions to East African growth should serve as good news in the long-term as well.
With the region’s top exports being predominantly agricultural, specializing in regional staples such as coffee, spices, fruits, and nuts, the prominence of a growing service sector is especially important because it provides much more staple and potentially more fruitful avenues for economic growth. While agricultural exports may greatly fluctuate in value based on the outcomes of periodical harvests and seasons, services such as tourism and R&D are much more resilient as their value is much less contingent on the arbitrary factors that the agriculture sector is. Especially as climate change instills worsening drought conditions and rising temperatures in East Africa, it’s imperative that the service sector performs a greater role in the region’s economic growth as its agricultural industries only seem destined to become further harmed.
Outside of the “adverse impacts of climate change,” however, the report also mentions other risks to continued East African growth including “gaps in infrastructure, domestic conflicts and political instability,” and “macroeconomic imbalances.” While China’s Belt and Road Initiative may be seen as a potential solution to the region’s infrastructural needs, doing so would only incur further debt and rising interest rates that already constitute the majority of East Africa’s “macroeconomic imbalances.” Meanwhile, the prospects of war seem grim on Africa’s Atlantic coast as members of ECOWAS allocate troops and resources towards a potential invasion of Niger. While this regional instability will likely not spill over into East Africa, the apparent success of the coup in Niger and the improvised response from ECOWAS may encourage factions and groups in the region to take similar action. In total, however, while a number of potential challenges may make their presence known in the coming years for East Africa, the region nonetheless remains the continent’s fastest growing region, largely helped by a highly beneficial service sector.