New oil finds in Kenya set to enhance economic diversity, ICAEW
While most African countries are bearing the brunt of the US-China trade war, as well as a slump in commodity prices which is greatly affecting exporters, East Africa’s economic diversity is still playing a key role in cushioning the region from shocks.
This is according to the latest report from ICAEW - the Institute of Chartered Accountants in England and Wales - Economic Update: Africa Q3 2019. The report provides GDP growth forecasts for various regions including East Africa which is set to grow by 6.3%, West and Central Africa at 3.4%, Franc Zone at 4.7%, and Southern Africa at 1.3%.
The report, commissioned by ICAEW and produce by partner and forecaster Oxford Economics, outlines how East Africa’s growth is mainly driven by strong performances in the two major economies, Kenya and Ethiopia.
Kenya, who’s President Uhuru Kenyatta in March signed into law a long-awaited petroleum bill that regulates oil exploration and production, recently joined the league of oil exporting nations after a cargo of 200,000 barrels of oil from Turkana was shipped from Mombasa. Despite the fact that commercial production is still years away, the new development gives Kenya a chance to enhance its economic diversity and include oil exportation as a foreign exchange earner.
Speaking during the launch of the quarterly report, Michael Armstrong, ICAEW’s Regional Director of the Middle East, Africa and South Asia, said that the strength of Kenya’s diverse economy plays a major role in keeping it safe from global economic fluctuations. “A strong service sector keeps Kenya’s economy shielded from the trade war currently raging between the United States and China, while also protecting it from global commodity price slumps,” said Mr. Armstrong.
“This diversity has played a key role in helping Kenya to weather the storm caused by the instability of oil prices. This, in addition to a well-regulated, mainly private services sector is key to the survival of the economy,” he added.
The report continues to state that East Africa’s growth will be boosted by the entry of Uganda and Tanzania into the league of petrochemical exporters within the next few years. While still expected to remain the strongest growing region on the continent, East Africa is projected to record a slightly lower real GDP growth rate of 6.3% this year compared to 2018.
Southern Africa is forecast to keep struggling with a growth rate of 1.3% in 2019 as the region’s economic anchor, South Africa, is expected to show nearly-flat growth because of policy uncertainty, concerns over debt-laden parastatals and high unemployment. In the region’s other countries growth has been slowed by supply-side challenges, notably adverse weather conditions in the wake of two cyclones, a regional moisture deficit and power rationing.
Regional GDP growth for Central and West Africa is forecast at 3.4% in 2019 and incorporates the impact of the Nigerian economy’s slow start to the year, as pipeline damage curtailed oil production
The Franc Zone is expected to grow at 4.7%, owing to a structurally low international oil price environment, which continues to weigh on growth in the region’s oil exporters.
North Africa’s real GDP growth rate is forecast to slow to 2.8% in 2019, due to oil production disruptions in Libya which compounded the effect of weak Eurozone demand on the region’s other economies.