Experts have advised the government and private sector to stop job cuts and scale down on non-urgent projects to boost tax levels and achieve economic growth in 2018.
Stanbic Bank economist Jibran Qureishi predicted that Kenya’s Gross Domestic Product growth will rise to 5.6 per cent this year from 4.4 per cent projected in 2017.
“One way to get your tax revenues to comfortable levels is to ensure that job losses stop, and that means getting your economic activities back,” Qureishi said.
The 2018 macroeconomic outlook said the biggest risk to the projected growth is a slower private sector credit growth and fiscal consolidation.
The government needs to urgently adapt an industrial policy rather than persisting with a policy focus on attracting financing for an infrastructure led growth model.
Qureishi said the country’s debt levels are a threat to economic development hence the need for an industrial policy that would seek to improve the productivity of the labour intensive sectors like agriculture and manufacturing.
With infrastructure built over the last few years, an increase in labour would ensure efficient utilisation of existing projects and an ultimate increase in tax levels.
Kenya should aim to grow at an average six per cent year on year, supported by the service sector, better agricultural output as well as continuation in public investments infrastructure, for a sustainable economic development to be achieved.
The report recommended job creation efforts and a keen look into debt servicing, and urged the government to stop increasing Value Added Tax.
“GDP growth should be more than just a number. If it goes up, then the number of jobs, exports, and taxes should go up. If this is not happening, there is a productivity gap,” Qureshi said.
It projected an increase in inflation in the second half of 2018 as a result of higher fuel and transport costs, however it records that the first half of the year will likely see commodity prices rise at 4.4 per cent due to a strong base effects and improved weather conditions.
A rise in vegetable prices in the first quarter of the year will be balanced by the favourable base effects.