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There is no greater demonstration of the risks of economic forecasting than the quick revisions that have followed post the declaration of Covid-19 as a global pandemic. The International Monetary Fund’s revision of global economic growth from a January figure of 3.3% , were subsequently revised to -3% during the release of the World Economic Outlook in April 2020 . In the space of three months, global forecasts from institutions with longstanding experience swung by a massive 6.3 percentage points. Caught in this tumultuous change of global fortunes are several African countries including those of the eastern Africa region.
Forecasts anticipated a respectable growth level for the world, with countries of sub-Saharan Africa expected to grow at 3.5% in 2020. Within the Sub-Saharan Africa region, the expected growth for the five countries of the East African Community (EAC-5) [1] was 5.3%. These figures seemed sensible at the time owing to the fact that some countries in Sub-Saharan Africa had locked in annual growth rates that exceeded global averages in the last five years. In addition, four of the EAC-5 were disproportionately represented among the top 15 globally. The exception among EAC countries was Burundi, whose political challenges caused economic stagnation. Despite the growth for EAC-5 being from a low base, they had been on a good run in the last decade, and the major concern was to convert this growth run into a structural change by converting labour from subsistence agriculture to light manufacturing.
Table 1: Comparison of projected Economic Growth Rates (2019-2021) While Kenya’s growth prospects remained impressive, selected EAC-5 countries were showing pressures related to high debt servicing costs relative to public revenues, high fiscal deficits, weakening currency and the risk of sharply reduced harvests on account of the expected second phase of the desert locust infestation. Kenya has been contending with reduction in contribution of private investment to GDP growth despite high growth rates, suggesting that private firms were in an extremely weak position. These threats were well within the sightlines of managers of public affairs but the risks changed dramatically on 13 March, 2020 when a diagnostic test confirmed the first person infected with the novel corona virus in Kenya’s territory.
Based on the April edition of the World Economic Outlook 2020, the growth forecast for the east African region has seen a resounding revision. Having accounted for the shock of the COVID-19 pandemic, the growth prospects […]