Despite being affected the most by inflation in 2022 with an average rate of 25.3 per cent, East Africa is expected to record a much lower price increase rate of approximately 5.4 per cent in 2023.
The outlook is contained in the latest Africa’s Macroeconomic Performance and Outlook report by the African Development Bank (AfDB).
According to the breakdown, headline inflation is expected to ease to about 13.5 per cent across the continent, down from 13.8 per cent last year.
However, more than 10 countries are still expected to record double-digit inflation.
Inflation rates in Rwanda slightly dropped to 21.6 per cent in December, 2022, compared to 21.7 recorded the previous month.
Meanwhile, the report pointed out, while the continent’s average trade deficit is expected to stabilise at about 1.6 per cent of GDP in 2023, many countries on the continent will still record trade deficits above five per cent.
In the EAC, Burundi followed by Rwanda are projected to have the highest deficits, at 11.3 and 10.8 per cent of GDP.
Uganda, Kenya and Tanzania will record negative trade balances of 8, 5.2, and 3.5 percent respectively.
Projecting the economic growth, however, AfDB, says the continent’s economies are expected to grow faster than global projections this year, citing that the improvement will see the continent’s growth rate outpace global projections of 2.7 per cent.
This, according to AfDB president Akinwumi Adesina, "reflects continuing policy support in Africa and global efforts to mitigate the impact of external shocks and rising uncertainty.”
"Global financial conditions have tightened and are projected to remain restrictive in the near term, compounded by increased volatility in global financial markets and persistent disruptions in global supply chains,” Adesina added.
Other risks, based on the outlook, include dependence on commodity exports, regional conflicts in "key hotspots like Burkina Faso, Democratic Republic of Congo, Ethiopia, Mali, and Mozambique”, and political risks due to upcoming elections in a number of countries.
Among other recommendations, AfDB said there was a need to boost intra-Africa trade, reforming tax administration regimes, reducing budget deficits, cushioning the most vulnerable in societies, and managing foreign exchange reserves to reduce exchange rate volatilities.