World Economy

Kenya and Tanzania Can Weather Economic Shocks

Kenya and Tanzania Can Weather Economic Shocks
Kenya and Tanzania Can Weather Economic Shocks

Kenya and Tanzania are likely to be the most resilient against economic shocks because of their diversification and economic size, a new report by rating agency Moody’s says.

The agency noted both countries’ gross domestic product per capita either exceeded or was close to Ksh300,000 ($3,000) in 2016 on purchasing power parity basis—on the strength of what a given unit of the currency can buy in each country, TheEastAfrican reported.

“The size of the economy, as measured by nominal GDP in US dollar terms, acts as a proxy for diversification in the economy and capacity to generate sufficient and stable revenue to service sovereign debt. Kenya is the largest of the four East African economies…Tanzania’s economy is also larger than the B-rated median (countries),” said Moody’s.

While Kenya’s GDP growth is likely to be in the range of 5-6% in the next two years, that is 2018 and 2019, that of Tanzania is projected to be in the region of 6.5 and 7.5%.

Tanzania ranks with Rwanda in terms of the economic growth rate for the next two years.

“The Kenyan economy is more diversified than its regional peers. The diverse growth drivers have supported Kenya’s relatively high and stable growth rates over the past decade.

“This comes in spite of the economy being hit by multiple shocks in recent years, including droughts that weighed on agricultural activity, political uncertainty in 2017 that weighed on business and consumer sentiment, and the negative impact of the interest rate cap on bank lending,” said the agency.

“We expect growth to remain highest in Rwanda and Tanzania. By and large, our expectations for real GDP growth rates of 5-6% in Uganda and Kenya, and 6.5-7.5% in Tanzania and Rwanda,” said Moody’s.

For the east African region covering four countries including Uganda, Moody’s said that the growth is likely to be among the highest in sub-Saharan African.

“The East Africa region’s economies of Kenya, Tanzania, Rwanda and Uganda will remain among the fastest growing economies in sub-Saharan Africa and globally,” said the agency.

Earlier in the month, Rwanda received the green light to continue borrowing in foreign markets, after Moody’s affirmed its B2 long-term rating.

Moody’s noted that although Rwanda’s debt burden has risen in recent years and is unlikely to decline in the next few years, the country’s has demonstrated institutional strength and will allow the government to maintain macroeconomic and financial stability.

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