The service sector in East African countries is emerging as a strong contributor to growth of the economies with potential of even doing better compared to other traditional performers such as agriculture.
The sector contributed 2.0 per centage points of the region’s GDP growth of 4.4 per cent in 2022, a decline from 4.7 per cent growth in 2021. The East Africa’s natural and cultural attractions draw tourists from around the world, creating a demand for services like accommodation, food, and entertainment. With more people moving to urban areas, there is a greater demand for services like transportation, communication, and retail.
The emergence of a middle class in the region also contributes to increased demand for services like banking, insurance, and healthcare. The services sector has greater potential for expansion and innovation than agriculture and mining, which are the traditional sources of income in East Africa.
The findings are contained in the East Africa Economic Outlook by the African Development Bank. The report notes that although economic recovery in Africa slackened in 2022, East Africa was among the continent’s highest growth region. “East Africa (EA) recorded a decline in real GDP growth from 4.7 per cent in 2021 to 4.4 per cent in 2022, but this was higher than Africa’s average of 3.8 per cent and only lagged Central Africa’s growth of 5.0 per cent.”
“The growth slowdown was due to several factors, including the global growth slowdown, higher consumer prices, adverse weather conditions and mounting public debt. Ethiopia, Kenya,Rwanda, Seychelles, Tanzania, and Uganda had the highest growth, while Burundi, Comoros, Djibouti,Eritrea, and Somalia, posted lower growth rates, with South Sudan and Sudan remaining in recession.”
East Africa’s medium term economic growth is expected to outpace that of Africa and all other regions of the continent.
Economic growth in EA will accelerate to 5.1 per cent in 2023 and 5.8 per cent in 2024, largely driven by growth in Uganda, Ethiopia, Kenya, Djibouti, and Tanzania in that order. The current conflict between Sudan’s military and the country’s main paramilitary force is a threat to regional stability and is likely to lower these projected growth rates.
Kenya’s Economic Growth will Slow to 5% in 2023 – World Bank – Kenyan Wallstreet
