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North Africa was the second fastest, at 4.1 percent, while West Africa’s growth rose to 3.7 percent in 2019, up from 3.4 percent the year before/FILE

Finance

Emerging sectors propel EAC economies as agriculture, manufacturing drag GDP growths

NAIROBI, Kenya, Apr 23 – East African economies will need to do more to bolster the performance of key sectors of agriculture and manufacturing in order to consolidate the economic growth of the last five years.

A report on the emerging dynamics in the regional economies by ICEA Lion Asset Management shows agriculture’s contribution to the GDP has remained stagnant in Kenya while declining in Uganda, Tanzania and Rwanda over the last five years.

The report explores five emerging economic trends in the four regional neighbors which will be key in consolidating the GDP growth that has grown at twice the rate of population growth in Kenya, Tanzania and Rwanda.

In addition to the slowdown of agriculture and manufacturing, ICEA Lion’s report finds that Kenya’s economy displays greatest seasonality among the regional economies with agricultural output the highest in the first and second quarter while the trade sector peaks in the third quarter.

However, Kenya’s real estate sector has been the most resilient through the cycle, as it has grown at an accelerating pace every year.

“Should this trend persist, real estate could overtake manufacturing as the second largest contributor to GDO in the next five years,” says Head of Research at ICEA Lion Asset Management, Judd Murigi.

Murigi adds that GDP growth in the region has been propelled by the emerging sectors of ICT, financial services and real estate.

“Over the most recent economic cycle, these sectors have grown at double the overall GDP growth rate and 3 -4 times the population growth rate in Kenya, Tanzania and Uganda,” said Murigi.

The emerging economy, he says, could be an indication of the early stages of a structural transformation of economies in the region in line with well-established stages of economic development.

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Kenya has always seen the greatest increase in market prices, at 65 percent, over the last five years while Tanzania has experienced a 50 percent increase in market prices.

“Overall there is need to revitalize growth in the traditional mainstay sectors of agriculture, manufacturing, trade and transport as these provide the foundation upon which other sectors thrive. The recovery of the traditional ‘bread and butter’ sectors combined with the momentum provided by emerging sectors would significantly accelerate economic growth in East Africa,” said ICEA Lion Asset Management CEO, Einstein Kihanda.

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