Impact of Economic Drivers on the Growth of East Africa Partner States: An Analysis of Export Growth, Employment, FDI and Trade Openness

Foreign direct investment is similarly positioned in the global growth literature as a potential catalyst for productivity and long-run growth because it can bring capital, managerial know-how, global market linkages, and technology spillovers. Trade openness provides the fourth major channel, reflecting the degree to which an economy is integrated into global markets through imports and exports. Openness can raise growth through competition, technology diffusion via imported intermediates, and access to larger markets, but it can also expose economies to external shocks, premature deindustrialization, and balance-of-payments constraints if import growth outpaces export capacity. This paper empirically investigates the effect of export growth, the unemployment rate, foreign direct investment (FDI), and trade openness on economic growth among East African Partner States. The study uses a balanced panel dataset comprising 75 observations across 25 panel groups and applies a fixed-effects regression model to control for unobserved, time-invariant country characteristics that may jointly influence growth and the explanatory variables. Secondary data were drawn from established international databases, and the final sample included only observations meeting the study's inclusion criteria to ensure consistency and comparability across variables. The results indicate that export growth has a positive and statistically significant relationship with economic growth, supporting the view that stronger export performance is associated with higher output expansion through productivity and foreign-exchange channels. FDI is also positive and significant, implying that greater capital inflows and potential technology spillovers are associated with improved growth outcomes. Trade openness is negative and significant, suggesting that increased exposure to external trade may be associated with lower growth where openness is not matched by competitiveness, diversification, and resilience to external shocks. Unemployment is positive and significant, implying possible jobless-growth dynamics where output expansion does not translate proportionately into employment absorption. These findings provide policy-relevant insights for East Africa: export upgrading and productivity-oriented FDI should be prioritised, while trade liberalisation should be sequenced alongside industrial and labour-market policies that enhance competitiveness and employment creation. Given the moderate overlap between export growth and trade openness, additional robustness checks using alternative openness indicators or decomposing openness into export and import components would help clarify channels and strengthen policy interpretation.