NAIROBI, KENYA: National Treasury is considering reviewing its 5.8 growth forecast for this year after the economy performed below expectations in the first three months of this year.
Cabinet Secretary Henry Rotich said the Government is likely to relook at its growth projections after the second quarter (April-June).
Mr Rotich said unfavorable weather conditions and poor absorption of development funds by ministries and counties affected economic performance in quarter one of this year. "The growth of the economy in the first quarter was at 4.1 per cent, lower than we had initially projected. I think we had based our assumption on favourable weather conditions and better absorption of resources by ministries and counties," Rotich told a media briefing in Nairobi yesterday. "We will be re-assessing our growth projections after the second quarter. I would be more cautious to quickly revise our growth focus until the second quarter."
He said he expects increased infrastructural spending in the second half of the year to spur economic activities. The World Bank has since revised downwards its growth projections for Kenya this year (2014) from 5.2 per cent to 4.7 per cent even as the Jubilee administration maintained that the economic is on track.
A cross section of economists are of the view that the National Treasury's growth forecast of 5.8 per cent this year is unrealistic. This is because the prevailing macroeconomic environment is characterised by growing inflationary figures, high interest rates, volatile shilling, low foreign direct investments (FDI) and falling exports.
"Government figures are a bit exaggerated but the World Bank figures are more realistic in the context of our current scenario and the general macroeconomic environment prevailing in the country at this particular time," said Dr Samuel Nyandemo, senior lecturer at the University of Nairobi's School of Economics. "We are not able to meet our targets in terms of revenue collections and the issuance of the Eurobond just helped save the situation."
According to Nyandemo, key economic sectors such as tourism and agriculture are in danger of grinding to a near halt due to insecurity and poor rains. According to Scholastica Odhiambo, a lecturer at Maseno University's department of economics, the economy is unlikely attain its projected growth levels unless the fundamentals are working properly.
"The Tourism sector has not yet recovered yet it is one of the major contributors to the gross domestic product (GDP)," said Odhiambo, adding that Security is still a big problem, which will have an impact of reducing FDI in the country, in addition to stifling the growth of the tourism sector.
Kenya's GDP) expanded by 4.1 per cent in the first quarter of 2014 compared to 5.2 per cent during the same quarter of 2013 owing to insecurity and erratic weather patterns, according to the latest figures from the Kenya National Bureau of Statistics.
Similarly the cost of living has risen significantly with the general prices of goods and services rising to a seven-month high in June of 7.39 per cent from 7.30 per cent in May fueled by rising food, electricity and transport expenditures.
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