Kenya’s economy is projected to grow by between 6.4 and 6.6 per cent despite the drought in the country, the Institute of Chartered Accountants in England and Wales has projected.
This is higher than this week’s World Bank projection of 5.5 per cent, and the Central bank’s 5.7 per cent for the year 2017.
The ICAEW’s latest report, the Economic Insight: Africa quarter one 2017,
launched yesterday indicates that Kenya, among other
East African nations, has mitigated the effects of drought by stimulating economic activity through other channels such as substantial fiscal stimulus and loosened monetary policy.
“Overall, economic growth in East Africa remains strong despite the drought. Infrastructure development continues to stimulate industry across the region, while expanding services to the largely un serviced markets remains the key driver behind growth,” ICAEW Middle East, Africa and South Asia regional director Michael Armstrong said.
The accountancy and finance body points out that poor crop production has however had a negative impact on food price inflation in the country and the entire East Africa region.
The country’s inflation rose to a high of 10.28 per cent in March, a rate last seen in May 2012, the Kenya National Bureau of Statistics data shows, as a result of higher food prices due to the ongoing drought which
has left close to three million people in need of aid.
This is outside the Central Bank of Kenya’s preferred ceiling of between 2.5 per cent and 7.5 per cent. The cost of living measure was at 9.04 per cent in February.
“Inflationary pressures in recent months can almost entirely be attributed to high food prices, with non-food price inflation remaining subdued. Most agriculture in East Africa is highly dependent on the weather, and adverse rainfall is directly reflected in both agricultural production and food prices,” the ICAEW report states.
On January 31, the Central Bank downgraded Kenya’s economic growth forecast to 5.7 per cent in 2017 from 5.9 per cent last year, citing uncertainties in the global economy amid a ravaging drought.
On Wednesday, the World Bank cited drought, sluggish private sector credit growth and rising prices of oil as among major causes that will slow down the country’s growth.
The economy is however expected to pick up after this year, driven by the expected normalisation of rainfall, a firmer global economy, a rebound in tourism and the resolution of challenges curbing credit growth, the lender said.
Pressure is mounting on the government to review last September’s interest cap law which analysts increasingly blame for slowing economic activities.