By James Anyanzwa
As elections draw near, government and private sector have warned all is not well.
The reality of the situation was captured recently in the Economic Survey 2011, which warned Kenyans to brace for tough times.
Prime Minister Raila Odinga told Parliament of intelligence report warning the country risks falling into violence in the coming elections. This is mainly due to the increased tribal politics.
The minister of State for Planning, National Development and Vision 2030 Wycliffe Oparanya, while launching the 2011 Economic Survey report last week, also cautioned about the impending economic times, which he described as ‘difficult’ for Kenyans.
Oparanya noted rising political temperatures close to the elections is tantamount to driving investors away.
As the economy grounded to a near halt last year with key sectors recording declines save for education and tourism sectors, Government’s economic outlook this year indicates the worst is not yet over. “
This is going to be a difficult year, “said Oparanya, adding that, “We will expect Kenyans to pull up their socks and work hard.”
Widespread fears
Though Government projections point the economy could grow between 3.5 per cent and 4.5 per cent, fears the economy could plunge to figures experienced during the 2007 post-poll chaos are real.
“I think the main factor now is political instability, which will affect us,” says Joe Nyandiko, senior researcher at Kenindia Assurance. “We need political stability because investors are now skeptical and are shifting attention to Rwanda and Tanzania where they feel there is more stability.”
Nyandiko notes the economy is still faced with high fuel and commodity prices, which have significantly pushed up the cost of living. “Things are not good yet. The real change that we feel the economy has done well may not be there,” he says.
Recent budgets have been tailored to support growth and mitigate the adverse effects of domestic and external shocks.
This requires stepping up both public and private investment to raise economic competitiveness and create more employment opportunities.
Last year, the World Bank’s country director Mr Johannes Zutt warned the economy could further decelerate if the forthcoming General Election is not handled cautiously. Save for 2002 elections, the past general elections of 1992, 1997 and 2007 have seen the economy slow down.
World Bank Lead Economist, Nairobi office Wolfgang Fengler says growth in election years has been one per cent below than the long-term average for the past 30 years. “The economy has returned to stability. Inflation is declining and the exchange rate has stabilised. Even so, the economy is not healthy and structural imbalances remain,” said Fengler.
Account deficit
“The current account deficit has reached record lows and remains a major concern.”
The Independent Electoral and Boundaries Commission puts the figure Sh36 billion, representing the largest budget for an election since the country’s independence. It will also be the most expensive election in the world.
The amount is four times more than the 2010 constitutional referendum. In the first election under the new Constitution, in one day at least 20 million Kenyans are expected to vote in six electoral posts.
They include president and deputy, member of the National Assembly, special women ballot, Senator, governor and deputy, and members of the county assemblies.
This will take place in 290 constituencies and 1,450 wards, plus other special seats elected on the basis of a party list.
“We have faced several challenges since last year. Agriculture is still underperforming. We expect increased funding into the sector in the next financial year,” says Paul Mbuni, the National chairman of the Kenya Society for Agricultural Professionals.
Import economy
Kenya is largely an import-driven economy making it vulnerable against world currencies especially the dollar.
“People have less money to spend and that will dampen demand in the economy and slow down growth,” says Dr Jim MacFie, an academic and research director at Strathmore University.
The economy fell to 1.7 per cent in 2008 from a high of 7.1 per cent in 2007 after a disputed presidential poll that saw 1,350 people killed and thousands displaced.
It registered a growth rate of 2.6 per cent and 5.6 per cent in 2009 and 2010 boosted by the resurgent tourism sector and resilient building and construction industry.
The economy, however, slumped to a growth rate of 4.4 per cent last year due to erratic weather conditions, escalating oil prices and weak shilling.
Others were high inflation and uncertainty in the global economic environment.
Economic fortunes are expected to deteriorate further this year with the economy growing at between 3.5 per cent and 4.5 per cent.
