- This is the third cut in a row this year, having slashed the forecast from 5.8 per cent it projected in November last year.
- The lender projects the country's debt profile to weaken further, making the country unattractive, especially to external lenders.
Image: COURTESY
NCBA Bank has further cut Kenya's growth prospect by 30 basis points, citing election fever, currency devaluation, growing inflation and poor rainfall.
The lender now projects the economy to expand by 4.9 per cent in the current financial year down from 5.2 per cent projected in April.
This is the third cut in a row this year, having slashed the forecast from 5.8 per cent projected last November.
''We project GDP growth to slow down to 4.9 per cent, slower than National Treasury’s six per cent forecast as consumption and investments slow amid rising costs and uncertainty,'' NCBA economist Raphael Agung' said.
NCBA's forecast is less than the National Treasury and World Bank projections. The government expects the country's GDP to expand by six per cent.
The global lender, in its recent economic outlook, expects Kenya’s real gross domestic product (GDP) to grow by 5.5 percent in 2022 and 5.2 percent on average in 2023–24.
An erratic rainfall pattern being experienced in the country poses a major threat to the country’s leading GDP earner, the agricultural sector.
The report shows agriculture, forestry and fishing contracted to -0.2 per cent from 4.6 per cent growth recorded in 2020.
The lender projected a further increase in the cost of living amid the weakening shilling against the greenback and high global fuel prices, a result of the Russia-Ukraine war.
The shilling has been crumbling against the greenback for over a year now, dropping almost 3.5 per cent since January to trade at 117.40 units yesterday.
This is attributed to volatilities in the global marketplace and rising inflation, especially in the US, where the government has intervened by raising the base lending rate. the benchmark for most interest rates.
Last week, Joe Biden's regime raised its Federal rate by 0.75 per cent to range between 1.5 and 1.75 percent, the highest jump since 1994.
The strengthening shilling is also expected to worsen Kenya's tight debt obligation, with the yield on Eurobond hitting double digits according to the latest CBK weekly bulletin.
NCBA projects the country's debt profile to weaken further, making the country unattractive, especially to external lenders.
Lat month, both Moody's, Fitch rating and S&P lowered the country's creditworthiness, citing high uncertainties both in the local and international markets.
Kenya's debt registry as of the end of last year shows gross public debt crossed the Sh8 trillion mark to stand at Sh8.2 trillion against the country's GDP estimated at Sh10.7 trillion.
The current debt ceiling stands at Sh9 trillion and is expected to accrue to a 10 trillion mark. This is with the government's strategy in addressing the fiscal implications towards attaining its developmental agenda.
“Continued rise in the debt ceiling will cause increased interest rates in efforts to lower the debt ceiling that is currently a main concern to the taxpayer,'' Agung’ added.
Most investors have recently shunned the acquisition of credit to invest with the looming uncertainties that are seemingly occasioned by the electioneering period. This slows down growth.
“As we approach the general elections, it noted that elections points in Kenya have always had a negative GDP outcome; nevertheless, its worth noting that elections do not necessarily stop growth and investment but may just delay the investment process,” Agung’ said.