The economy is likely to slow down this year, analysts at asset manager Kenya ICEA-Lion Group said in their 2017 outlook report.
They project the economy will expand by between five and 5.5 per cent in 2017 compared to an estimated 5.9 per cent last year.
Growth this year will largely be driven by public investment in infrastructure development, the analysts said. They said the Jubilee administration is likely to accelerate the pace of implementing mega infrastructure projects ahead of the August 8 2017 general election.
Headwinds likely to face growth include increase in
inflationary pressures, slow down in the uptake of loans by the private sector, and foreign exchange pressure against the bullish US dollar.
“We view the recently passed Banking Act as a detriment to the private sector growth, which remains a major contributing factor to the country’s gross domestic product. We expect to see the full effect of the Act in the fourth quarter banking results,” ICEA Lion Asset Management CEO Einstein Kihanda said in a statement yesterday. “This is likely to lock most of the consumers and SMEs from accessing loans from commercial banks since all cannot fit within the four per cent above the Central Bank Rate pricing framework.”
The private sector credit growth is expected to remain low this year.
President Uhuru Kenyatta assented to the bill on August 24.
Private sector lending has been on a decline for the better part of 2016 touching a low of 4.6 per cent for the year ending October 2016, from 19.5 per cent recorded over a similar period in 2015.
Growth in the Agriculture sector is also expected to decline in 2017 as drought conditions persist, the asset manager said.
The country is already experiencing prolonged dry weather conditions, expected to negatively affect inflation as food prices are likely to increase.
Local pump prices may also remain elevated following a deal by Oil Producing and Exporting Countries to cut global oil supply. Inflation is however expected to remain within the government’s upper target range of 7.5 percent.