East Africa economy avoided significant pandemic impact
Africa, along with the rest of the world, was significantly impacted by the Covid-19 pandemic in 2020 and witnessed one of its worst economic recessions in 50 years, heightened by weak healthcare systems and infrastructure.
Overall GDP contracted by 2.4% in 2020, less than the 3.6% contraction in global GDP, 6.7% in the Eurozone and 4.3% in the Americas.
Few countries were able to avoid the pandemic’s impact. Across Africa, East Africa was most robust, with Tanzania and Ethiopia growing fastest in 2020.
Southern Africa was greatly affected, with South Africa registering the highest number of Covid-19 cases in 2020, pushing the economy into deep recession.
East Africa remained resilient, continuing its trajectory as the fastest-growing region in Africa in 2020, capitalising on its success of the last two decades. With most countries having experienced GDP contraction in 2020, owing to Covid-19, the East region’s major economies grew by 2.3% on average, with Kenya seeing a slight GDP contraction for the first time in two decades. Although GDP growth in Ethiopia and Tanzania slowed in 2020, it remained in positive territory.
East Africa’s GDP should pick up in 2021. Kenya’s growth is expected to rebound to 5%, supported by the Economic Recovery Strategy that has been implemented and a strong recovery in the service sector.
Kenya may also benefit from an unprecedented free trade deal with the US, which is currently under negotiation.
A new stable government and rebound in manufacturing will drive Tanzania’s growth in 2021 to 4.5%, while Ethiopia’s growth is projected to decline to 2.2% in 2021 as it struggles with high unemployment and political unrest in Tigray.
Both Ethiopia and Kenya recorded some of the highest Covid-19 numbers across Africa.
The current low vaccination rates, (only 1.2% of the population is fully vaccinated in Kenya) pose further risk to the outlook. In addition, rising public debt, with high debt distress risk in both Kenya and Ethiopia, could slow the growth rebound.
Kenya’s debt rose to an estimated 69% of GDP at the end of 2020, which is considered high by emerging market standards.