Nairobi - The economy of Kenya was the poorest growth performer in east Africa last year, the 1998 East African Development Bank (EADB) said in a report released this week.
While Kenya`s economic growth registered a downward trend in 1998 for the third successive year, Uganda`s growth continued to remain on course and the overall economic performance of Tanzania was above projected levels.
In its current review of the three member states` economies for 1998, the EADB said Kenya`s gross domestic product (GDP) in 1998 was estimated to grow at 1,6 percent a year, while Uganda and Tanzania recorded 5,5 percent and 3,5 percent, respectively.
However, all three agriculture-based economies suffered from the devastating effects of heavy rains caused by the El Nino weather anomaly in 1997/98.
The performance of the Ugandan economy was the most impressive of the three. "Higher annual growth of up to 7 percent (compared to 5,5 percent in 1998 and 5,2 percent in 1997), is expected in the coming year (1999), as the Ugandan economy rebounds primarily as a result of increased private investments, which grew by 19 percent in real terms in 1998,"it said.
Uganda recorded "exceptionally low levels" of inflation during the 1997/98 fiscal year, due to the observance of a prudent fiscal and monetary policy stance.
While Tanzania had consumer price inflation at 11,2 percent, Uganda stuck it out at 2,6 percent and Kenya grappled with an inflation level of 6,6 percent.
The contribution of the manufacturing industry to Uganda`s GDP grew from 8,5 percent in 1997 to 9,1 percent in 1998.
Manufacturing activity was more pronounced in the agro-processing of coffee, sugar, tea and cotton. However, the sector continued to suffer from high factor costs such as transport, utilities and unskilled manpower.
Similarly, Tanzania`s commendable 3,5 percent growth showed it was responding favourably to structural reform programmes. The country`s manufacturing sector was expected to have increased its contribution to GDP by 5,5 percent in 1998 compared to 5 percent in 1997.
The bank attributes Kenya`s poor performance to reduced donor support, declines in gross investment, increased insecurity and a high fiscal deficit.
These factors were aggravated by a dilapidated infrastructure, devastating rains, the global recession, high local production costs and global competition.
The bank said Kenya`s economic activity was likely to remain depressed unless interest rates declined to a sustainable level. "The (Kenya) government`s efforts to observe strict fiscal discipline, coupled with increased revenue collection and a possible downward review of the taxation structure E will greatly assist in placing the Kenyan economy on the road to recovery and growth."
The EADB is jointly owned by the three countries, which each hold 26,44 percent of the paid-up share capital. FMO-Netherlands owns 11,99 percent. Several other European agencies and the African Development Bank hold 8,69 percent between them. - Independent Foreign Service