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IMF EAC to experience drastic economic slumps due to Covid-19

East African Community countries will have huge drops in their economic growth rates this year as a direct result of the global coronavirus crisis

The International Monetary Fund’s latest World Economic Outlook projections for 2020 pegs Kenya and Tanzania’s respective GDP growth rates at one per cent and two per cent respectively in 2020, down from 5.6 and 6.3 per cent respectively in 2019.

Uganda will maintain a 3.5 growth rate this year, compared with 4.9 per cent in 2019. Africa’s cities are home to 600 million people and account for more than 50% of the region’s GDP. This is even higher at more than 70% for countries such as Botswana, Uganda, Tunisia and Kenya.  Nearly a third of national GDP (31%) comes on average from the largest city in African countries. As such, the economic contribution of cities in the region is far higher than their share of population.

Rwanda’s predicted decline from 10 per cent in 2019 to 3.5 per cent this year is the steepest drop in the region, comparable only with Ethiopia’s new 3.2 per cent projection from nine per cent in 2019.

But the outlook for 2021 is slightly better for Uganda, Kenya and Tanzania, with Nairobi’s growth rate expected to shoot back up to 6.1 per cent (higher than 2019) while Tanzania and Uganda also recover to 4.6 and 4.3 per cent respectively.

The IMF said the Covid-19 pandemic will cause a three per cent contraction in the global economy in 2020, much worse than during the 2008-2009 global financial crisis.

“In a baseline scenario, which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8 per cent in 2021 as economic activity normalises. The risks for even more severe outcomes, however, are substantial,” it added.

For Tanzania, the new IMF projection represents a sharp change from early last month—after completing its latest mission to the country—when it reported that the economy had rebounded to an estimated annual growth rate of six per cent in 2020, up from four per cent projected in early 2019.

That projection was still below the seven per cent growth rate quoted by the government, a contradiction that caused some friction between Tanzania and the IMF last year.

 

 

 

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Last modified on Thursday, 14 May 2020 16:43

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