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IMF downgrades Africa's growth to 3.5% on global shocks

Kenya largely depends on horticultural exports to Europe, tourism and diaspora remittance for foreign income.

In Summary

• The simmering tension in the global economy has the international lender downgrade economic growth of at least 70 per cent economies in the world.

World Bank President Jim Yong Kim (L) and International Monetary Fund (IMF) Managing Director Christine Lagarde attend a Development Committee plenary during the IMF/World Bank annual meetings in Washington, U.S., October 14, 2017./COURTESY
World Bank President Jim Yong Kim (L) and International Monetary Fund (IMF) Managing Director Christine Lagarde attend a Development Committee plenary during the IMF/World Bank annual meetings in Washington, U.S., October 14, 2017./COURTESY

Export and debt depended countries like Kenya face eminent shrink in economic growth in case tension in the global economy persists, the International Monetary Fund has said.

Kenya largely depends on horticultural exports to Europe, tourism and diaspora remittance for foreign income. It also heavily bank on borrowing for development and stabilization of its fiscal deficit.

This means, squabbles in Europe, US or China, leading export and debt markets for Kenya are is likely to have a knock over effect on the country’s economic growth.

The simmering tension in the global economy has the international lender downgrade economic growth of at least 70 per cent economies in the world.

"Financial tightening alongside the normalization of monetary policy in the larger advanced economies have all contributed to a significantly weakened global expansion, especially in the second half of 2018,’’ IMF said.

The lender pointed out eco-political tension in global leading economies including US-China trade wars, Br-exit politics in UK, and increase in Federal Reserve Rate in US among others.

"If the downside risks do not materialize and the policy support put in place is effective, global growth should rebound. If, however, any of the major risks materialize, then the expected recoveries in stressed economies, export-dependent economies, and highly-indebted economies may be derailed,’’ IMF said

Consequence, the international lender slashed Sub-Saharan Africa growth to 3.5 per cent from earlier 3.8 per cent.

Leading economic power houses in the continent have not spared the cut, with Nigeria’s outlook being chopped to 2.1 per cent from 2.2 per cent while that of South Africa has been cut by 20 basis points to 1.3 per cent.

IMF however expects the economy to recover to 2.5 and 1.5 per cent for Nigeria and South Africa respectively in 2020.

On Monday, the World Bank cut the continent’s growth to 2.8 from earlier projection of 3.3 per cent on poor external microeconomics.

Even so, the continent’s growth is expected to recover to 3.7 per cent in 2020, so is the  global economy which is expected to slow to 3.3 per cent before rising to 3.6 in 2020.

Kenya’s growth was slightly downgraded to 5.7 per cent from 5.8 per cent.

Diversified economies especially in Asia and Africa are however expected to remain stable with some like Zambia, Ghana and Rwanda expected to post further growth.

The growth in global economy is depended on a rebound in emerging market and developing economies, where growth is projected to increase from 4.4 percent in 2019 to 4.8 percent in 2020.