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THE STATE OF EAST AFRICA REPORT SERIES

The Economy of East Africa

U.S. Army photos by John Hanson

The East African economy continued its impressive growth rate trend with an average of 6 per cent growth in 2011 and a GDP of $83 billion in that year. However, income per capita data for 2011 shows the significant intra-regional differences between Burundi’s per capita income of $271 and Kenya’s $808.

East Africa expanded the value of its total trade by $8.2 billion to $45.8 billion in 2011 from $37.5 billion in 2010. Imports continue to dominate the region’s trade. Import growth of $6.5 billion in 2011 was responsible for 79 per cent of the region’s total trade expansion and for 72 per cent of total trade in that year. Although exports increased by $1.76 billion they accounted for just 21 percent of that year’s trade growth and only 28 per cent of the region’s total trade in 2011, the lowest since 2005. The $18 billion value of East Africa’s top five imports in 2011 was more than twice as large as the $7 billion value of its top five exports. East Africa’s five most important export products can barely pay for its fuel bill.

East Africa attracted foreign direct investment (FDI) inflows of $3.9 billion in 2012, a $1.8 billion increase from $2.6 billion in 2011. With a combined total inflow of $3.4 billion, the two main energyrich countries of Uganda and Tanzania received 90 per cent of the investment inflows into the region. In addition to the lure of the extractives sector, other investors in East Africa are targeting regional and domestic consumers with healthcare, financial services and cement production.

In 2011, the region received $8.3 billion in total net disbursements of aid up from $7.9 billion in 2010, and representing 18 per cent of total aid flows to sub-Saharan Africa for 2011. Uganda and Rwanda experienced aid cuts in 2012. This year also saw a shift in aid allocations by donors away from the poorest countries, towards middle-income countries. These are signs that declining aid flows to the region could soon be a strong feature of its economic relationship with donor countries.