TOUGH TIMES

IMF likely to cut Kenya's economic growth to below 1%

IMF themed the June outlook as 'A crisis like no other, An Uncertain recovery'.

In Summary
  • Growth of one per cent would be Kenya's lowest in 18 years and delays further the country’s ambitious goal of registering double-digit growth.
  • The Kenyan government has put on a much brave face, forecasting 2.3 per cent growth in April down from 3.4 per cent in March. 
CAUTION: IMF wants local banks to tread carefully in regional expansion.
CAUTION: IMF wants local banks to tread carefully in regional expansion.

The International Monetary Fund (IMF) is likely to revise Kenya's economic projection below one per cent for this year due to the adverse effects of the coronavirus pandemic.

The global lender is expected to unveil a detailed economic update for Sub Saharan Africa on Monday, after downgrading global growth projections to negative 4.9 Wednesday. 

In April, IMF cut Kenya's growth projection for 2020 to one per cent in view of Covid-19 effects. This was a five percent drop compared to October last year when it projected the country's growth to expand by six per cent on a stable macro-economic environment. 

 
 

Growth below one per cent will be perhaps second-lowest in 20 years after the 0.5 per cent growth registered in 2002 arising from political uncertainties.

Growth of one per cent would be Kenya's lowest in 18 years and delays further the country’s ambitious goal of registering double-digit growth.

While the IMF and World Bank projections are pointing towards less than a percentage, the Kenyan government has put on a brave face, forecasting 2.3 per cent growth in April down from 3.4 per cent in March. 

Speaking to the Star on phone, Philip Mbai, a lead economist at Gram Capital said IMF will certainly lower Kenya's growth below one per cent with a gradual recovery in 2021. 

''It is clear that Kenya's growth will be slashed by 10 to 100 basis points based on the global trends as illustrated by IMF on Wednesday. Nothing less than a drop,'' Mbai said. 

''Taking into account the recent growth projections for our trading partners, Kenya’s GDP growth in 2020 is forecast to decline sharply to about 2.3 percent,” said CBK Governor Patrick Njoroge said in April.

 
 

On Wednesday, IMF gave a glimpse of just how bad coronavirus is impacting the global economy and more so for Sub Saharan Africa, cutting the region's economic growth prospects for 2020 to negative 3.2 per cent compared to a positive growth of 3.1 last year. 

It slashed growth prospects for Nigeria and South Africa, the two continental countries features in the survey at negative 5.4 and eight, from positive growths of 2.2 and 0.2 per cent in 2019 respectively. 

According to the outlook, the adverse impact on low-income households is particularly acute, endangering the significant progress made in reducing extreme poverty in the world since the 1990s.

The IMF's managing director, Kristalina Georgieva had already warned that the April forecast had been overtaken by events and that the likely path of the global economy was looking worse.

''The recession caused by the pandemic - globally and in many individual countries - is likely to be deeper than the IMF previously thought,'' Georgieva said. 

IMF themed the June outlook as 'A crisis like no other, An Uncertain recovery'.