CHAPTER 1 Overview
- International Monetary Fund
- Published Date:
- December 2009
The East African Community (EAC) countries—Kenya, Tanzania, Uganda, and Rwanda—have been affected by the global financial crisis and global recession.1 The fall in global demand and inflows and tighter liquidity conditions abroad affected the countries in this region as elsewhere in sub-Saharan Africa. But how hard have countries in the EAC been hit? Have the spillovers from the global crisis affected countries in the region as much as other countries in the sub-Saharan region? Have the transmission channels or magnitudes of the spillovers been different across EAC countries? How can these countries return quickly to a path of sustained high growth? What is the role for policy? Would acceleration of regional integration and policy coordination help achieve this goal? Would it make the region less susceptible to shocks? This paper focus on the EAC countries and attempts to address these questions. The key messages are these:
- Spillover effects of the global crisis are driving the economic slowdown in the region. The downturn is most pronounced in Kenya, which has suffered from external shocks amplified by adverse domestic developments.
- Growth in the region is expected to rebound in the coming years, helped by a more favorable external environment as well as domestic stimulus. While the precise pace of the projected recovery remains highly uncertain, it seems that it might take some time, at least a few years, for growth to catch up to precrisis levels.
- Countries in the EAC generally responded to the slowdown with monetary and fiscal policy easing. In the coming years, adjustments to macroeconomic policy stances will be needed to sustain a strong recovery.