World Economy

Kenya Growth Rate Cut Further

Kenya Growth Rate Cut FurtherKenya Growth Rate Cut Further

World’s leading banks, think-tanks and consultancies have joined the queue in downgrading the Kenya’s growth outlook for 2017, citing slowdown in private sector credit and dampening business sentiment ahead of August polls.

A consensus growth projection from 12 global institutions shows the country’s economy is likely to expand by 5.4%, a slower growth than 5.8% last year, Reuters reported.

The firms are JPMorgan of the US (4.9%), HSBC of UK (5%), Standard Chartered Bank (4.5%), Barclays Capital ( 5.7%) and New York-based brokerage firm Citigroup Global Markets (5.2%).

Others are Fitch Ratings-owned BMI Research (5.6%), consultancy firm Capital Economics of UK (5.5%), Washington-headquartered Frontier Strategy (4.6%), Economist Intelligence Unit (5.5%) and credit insurance firm Euler Hermes of France (6.5%).

Oxford Economics, the Oxford University’s economic forecasting arm, sees Kenya growing by 6.4% while Euromonitor International, a London-headquartered research firm, projects a 5.6% growth.

“GDP growth is expected to slow this year, as the interest rate cap continues to choke business investment,” economists at FocusEconomics, the Barcelona-based macroeconomic analysis firm, said in a consensus report. “In addition, political uncertainty around the August presidential election could dampen business sentiment.”

The analysts said last year’s growth of 5.8% was largely supported by external sector. Import bill reduced due to low crude oil prices while exports continued to grow, though at a slower pace, denoting demand in foreign markets, they said.

“This offset weaker domestic demand, as both private and government consumption slowed and fixed investment swung to contraction, with the latter trend aggravated by the government’s decision to cap interest rates in September,” FocusEconomics said.

The powerful Bretton Woods institutions–the World Bank Group and the International Monetary Fund–have piled pressure on the government to scrap rate cap to spur domestic demand, which has traditionally supported growth.

“Although the adverse effects of the controls are manageable in the near term, if maintained, they could potentially pose a risk to financial stability,” IMF deputy managing director and acting chair Tao Zhang said in a statement on January 26.


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