Global economists cut Kenya’s growth outlook on poll jitters

Global economists have marginally cut Kenya’s growth outlook for 2022 largely on rising external debt costs and reduced investor confidence ahead of the August 9 election.

A consensus outlook from 14 global banks, consultancies, and think tanks shows economic activities will likely expand 5.3 percent this year, a 10-basis point downgrade from 5.4 per cent projection last month.

Economists say election uncertainties will peak in the June-August period, resulting in slack business activity and wavering confidence in the economy, which will delay investment decisions and project implementation.

Analysts at Barcelona-based FocusEconomics, who compiled the March forecast data between February 15 and 20, said: “Kenya’s reliance on foreign capital for infrastructure and a rise in external debt pose downside risks to the outlook.”

The economists have backed robust public spending as well as continued spending by households and firms to sustain growth above five per cent this year for the second year running, after contracting 0.31 per cent in 2020.

New regime

They, however, see growth slowing slightly to 5.2 per cent next year in the aftermath of a new regime that will take over from President Uhuru Kenyatta after the August elections.

Deputy President William Ruto and ODM Party leader Raila Odinga are the leading candidates to succeed Mr Kenyatta, who has led the country since April 2013.

“Political uncertainty surrounding mooted constitutional reforms and the next elections in 2022 could also dent confidence,” analysts at Economist Intelligence Unit (EIU) wrote in the outlook report on Kenya.

The downgrade is notably on the weight of US-owned Moody’s Analytics, whose economists have slashed Kenya’s growth outlook sharpest to 6.2 percent from 8.6 per cent.

American investment bank Goldman Sachs, nonetheless, sees an economic activity of 5.3 per cent, a slight upgrade from 5.2 per cent last month.

The other institutions have largely retained their forecast on Kenya. They are UK’s Capital Economics (6.5 per cent), US’s JP Morgan (6.3 per cent), Switzerland-based Julius Baer (5.5 per cent), London-headquartered Euromonitor International (5.3 per cent), and New York-based brokerage house Citigroup Global Markets (5.1 percent).

Others are UK’s HSBC (5.0 percent), Fitch Solutions (5.0 per cent) and Fitch Ratings (5.0 percent), Washington-headquartered consultancy FrontierView (4.9 per cent), Standard Chartered (4.8 percent), Economist Intelligence Unit (4.5 percent), and Oxford Economics (4.3 per cent).

Real GDP

Kenya’s real GDP — a measure of economic output adjusted to inflation — has a history of slowing down during election years when firms put investment decisions on hold pending a return to normality in the political landscape.

During the last election in 2017, economic growth slowed to 3.82 percent from 4.21 per cent the year before, while in 2013 it decelerated to 3.80 per cent from 4.57 per cent, according to GDP figures, which have been revised following last year’s rebasing of the economy.

The aftermath of the deadly December 2007 presidential sank growth to 0.23 per cent in 2008 from 6.85 per cent, while in 2002 it slowed to 0.5 percent from 3.78 per cent the year before.

The same trend was witnessed in 1997 when growth dropped to 0.48 from 4.15 per cent, and in 1992 when it contracted to negative 0.8 percent from 1.44 per cent with the onset of multiparty elections.

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