By James anyanzwa

AIG Investments has for the third time lowered its growth forecast for the economy to between 1.5 per cent and two per cent this year.

The fund manager said persistent adverse weather conditions, rising energy costs and high level of inflation has jeopardised its recent projections of two per cent.

However, the fund manager predicted economic growth could accelerate to four per cent next year (2010) provided the fiscal stimulus is implemented in a timely manner, the country receives adequate rains from the El Nino, credit to the private sector becomes readily available and the political environment improves.

"The economy is suffering from the effects of high inflation that have surpassed personal spending and depressed global demand translating into weaker export growth and reduced private capital flows," said Mr Edward Gitahi, AIG Investments Senior Investment manager.

Mr Gitahi who was addressing a press conference in Nairobi yesterday said the high voltage political environment in the country could derail a sustained economic recovery.

The fund manager maintained the projection for overall inflation at 20 per cent for 2009 owing to inadequate food supply and higher electricity costs associated with a shift to the more expensive thermal generation.

In January 2009 AIG Investments, downgraded its projection for Kenya’s economic growth in 2009 from an initial 5.2 per cent to 3 - 3.5 per cent before reducing it further in May to two per cent.

Mr Peter Wachira, AIG Investment’s Vice President and Senior Investment manager, said that although Central Bank had made an effort to contain interest rates, Government borrowing and the increased issuance of corporate bonds could push the rates upwards.