The East African Community: Prospects for Sustained Growth
IMF Working Papers, November 14, 2012
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Bibliographic details
- Authors: Catherine McAuliffe, Sweta Chaman Saxena, Masafumi Yabara
- Published: November 14, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475539424.001
Summary findings
- The East African Community (EAC) has been among the fastest growing regions in sub-Saharan Africa in the past decade or so.
- The recent growth path will not be enough to achieve middle-income status and substantial poverty reduction by the end of the decade—the ambition of most countries in the region.
- The paper identifies a group of countries that achieved growth accelerations and sustained growth to use as benchmarks to evaluate prospects and potential constraints for EAC countries to translate their recent growth upturn into sustained high growth.
- EAC countries compare favorably to the group of sustained growth countries on:
- macroeconomic and government stability,
- favorable business climate,
- strong institutions.
- Important differences that may constrain sustained growth in the EAC include:
- smaller share of exports,
- lower degree of financial deepening,
- lower levels of domestic savings,
- higher reliance on donor aid,
- limited physical infrastructure and human capital.
- Policy choices to address some of these shortcomings could determine whether the EAC follows the path of sustained growth or follows other countries where growth upturns later fizzled out.
Comparative analysis and benchmarks
- Methodology: builds on growth literature to identify countries with growth accelerations and sustained growth as benchmarks.
- Benchmarks emphasize outcomes in:
- exports and external orientation,
- financial deepening,
- domestic savings behavior,
- aid reliance,
- infrastructure and human capital investment,
- institutional and macro-fiscal stability.
Policy implications and recommendations
- Addressing the identified shortcomings is central to sustaining growth. Priority areas include:
- expanding export shares and external competitiveness,
- deepening financial markets and inclusion,
- increasing domestic savings rates,
- reducing excessive reliance on donor aid by strengthening domestic revenue mobilization,
- investing in physical infrastructure and human capital,
- preserving macroeconomic and government stability and improving the business climate and institutions.
Subject areas and keywords
- Subject: Economic sectors, Exports, Financial sector, Foreign exchange, Government debt management, International trade, Production, Productivity, Public financial management (PFM), Real exchange rates
- Keywords: Accelerated growth, Africa, benchmarking, common market, EAC country, EAC economy, EAC growth, EAC integration, EAC member, East African Community, exchange rate, Exports, Financial sector, Global, Government debt management, growth acceleration, private sector, Productivity, Real exchange rates, sub-Saharan Africa, sustained growth, WP