- The lender however projects the country’s growth prospects to rebound next year at 5.3 per cent.
- Growth of the entire sub-Saharan Africa region has also been projected to decline to 3.3 per cent, down from 4.0 per cent of last year.
The International Monetary Fund has revised Kenya's economic growth prospects to 5.0 per cent this year, down from April’s projection of 5.3 per cent.
Despite being an upward projection from last year’s 4.8 per cent, the lender attributes the downgrade to Covid-19 effects, which the country is still recovering from.
“Still emerging from the Covid-19 pandemic, countries in sub-Saharan Africa have been hit by a sluggish global economy, worldwide inflation, high borrowing costs and a cost-of-living crisis,” IMF says in its latest regional economic outlook.
“In many cases, inflation is still too high, borrowing costs are still elevated, exchange rate pressures persist, and political instability is an on-going concern.”
The lender however projects the country’s growth prospects to rebound next year at 5.3 per cent, slightly below the previous projection of 5.4 per cent.
Widely attributing the slow growth to high levels of inflation experienced in the better part of last year, IMF says its widespread and rapid increase prompted monetary policy tightening around the world, which continues to weigh on general global growth this year.
For many countries in Africa, it meant slowing external demand, higher domestic interest rates, elevated sovereign spreads and on-going exchange rate pressures.
“All these piled pressure on debt levels and occasioned deep structural challenges which have combined to reduce access to external funding, yet another shock for a country like Kenya,” the lender says in part.
“As a result, at 3.2 per cent in 2023, growth in Africa is expected to continue its decline since 2021 at 4.8 per cent, and last year at 3.9 per cent.”
At the same time, IMF projects the global growth to slow to 2.9 per cent this year, down from last year’s 3.5 per cent.
However, it predicts a slowdown in the main cause effect, inflation, saying it is slowly coming down.
This is on the back of the higher-for-longer interest rate environment that is setting in across many major economies, prompting approach of the tightening cycle peak, seeing the ease of global financial conditions.
This, it says, has helped take at least some pressure off the funding squeeze for many countries on the African continent by reducing sovereign spreads, especially for those with relatively stronger fundamentals.
Growth of the entire sub-Saharan Africa region has also been projected to decline to 3.3 per cent, down from 4.0 per cent of last year.
This before rebounding to 4.0 per cent in 2024 in line with the anticipated global recovery, subsiding inflation and a winding down in monetary policy tightening.
Uganda and Tanzania have been projected to grow by 5.7 per cent and 6.1 per cent next year, respectively.
These are upward projections from the 4.6 per cent and 5.2 per cent of this year, respectively.
To ensure that the coming rebound is more than just a transitory glimpse of sunshine, the lender calls on states to guard against a premature relaxation of stabilisation policies.
This while focusing on reforms to both claw back lost ground from the four-year crisis and also to create new space to address the region’s pressing development needs.