The Common Market for Eastern and Southern Africa (COMESA) region has remained the fastest growing economy in the world with five member states DR Congo, Djibouti, Ethiopia, Kenya, Rwanda and Uganda recording growth levels of between 5 per cent and 10 per cent.
According to the latest COMESA macroeconomic report, the growth in most of member countries was supported by increased private consumption and investment. Among the 51 African countries evaluated on the conditions for doing business, Kenya, Uganda, Rwanda, Seychelles and Mauritius took the lead.
In 2015, the overall growth in COMESA region dropped to 6 per cent from 6.5 per cent in 2014 as a result of weaker global demand and lower international commodity prices. This adversely affected the region’s resource-rich countries, the report indicates.
The drop in commodity prices was attributed to weaker growth in China and its transition from investment and exports of industrial goods, towards consumption and services. Thus trade with China registered the largest deficit with a value of $24 billion, followed by EU with $21 billion, India ($9 billion) and South Africa ($5 billion).
In addition, intra-COMESA total exports declined by 8 per cent from $9.2 billion in 2014 to $7.6 billion in 2015.
The report shows that the savings rate in most COMESA member countries was below 20 per cent of the Gross Domestic Product (GDP). This resulted from the fact that a large proportion of the population was not connected to the financial system and, therefore, had no access to savings instruments. It is necessary to generate an adequate level of domestic savings in order to ensure higher level of sustained investment, the report says.
During the reporting period, the average overall investment, as a percentage of GDP in COMESA, increased marginally from 24.6 per cent in 2014 to 26.3 per cent in 2015. However, a number of COMESA member countries recorded investment performance of less than 20 per cent of GDP.
Region-wide, inflation increased marginally from 6 per cent in 2014 to 6.8 per cent in 2015. Lower global oil prices and the continuing fall in food prices, as well as prudent monetary policies contributed to the single digit inflation in most member countries.
However, currency depreciation in the wake of lower commodity prices increased the risk of inflation. With some countries experiencing increases in annual inflation rate due to exchange rate depreciation, most member countries focused their monetary policies on controlling inflation. In addition, the significant currency depreciation experienced by the region was driven by widening current account deficits on the back of persistent trade imbalances and, in some cases, late disbursement of external aid flows.
According to the report released early this week, high public sector demand for foreign exchange to finance big public investment projects, a strong US dollar and high demand for foreign exchange from the local corporate sector, also led to the depreciation. Owing to these developments, the COMESA intergovernmental committee recommended, among others, that countries undertake continuous improvement in political and economic governance, and economic management to enhance productivity in sectors where individual member countries have comparative advantage.
Further, it also called fast-tracking of regional integration and the implementation of the Tripartite Free Trade Area arrangement to boost intra-regional trade in manufactured goods.