By James Anyanzwa

The economy is in danger of under-performing in the run-up to the General Election.

The Institute of Economic Affairs (IEA), says the economy, whose growth dropped   to 4.4 per cent last year, faces additional threats.

These are Al Shabaab insurgents and likely travel advisories, reduction in exports due to the deepening Eurozone crisis, and the wait-and- see attitude adopted by investors pending the elections.

The civil society lobby group also notes that uncertainty around political transition to a new government, slow pace in passing of the Constitution related Bills and other Bills specific to creating an enabling environment for the private sector.

Others include unfavourable weather conditions and drought that have added to the growing misfortunes of the fragile economy.

IEA, however, observes that improving governance and infrastructure is likely to attract foreign direct investments.

The anticipated slow economic growth is likely to impact to a large extend on revenue collection resulting in huge budgetary deficit.

“It is not clear the measures the Government has put in place in terms of plugging this gap given the slow uptake in Treasury bills and bonds,” says IEA.

The lobby group says a number of things including funds towards implementation of the new Constitution, elections, public service salary increment demands from teachers and medical personnel and expenditure towards security operation along the Kenya-Somalia border are exerting demand for additional spending.

 The economy came under a lot of pressure from both internal and external shocks last year.

Higher inflation

The country experienced a vicious inflationary cycle emanating from high food and oil prices as the crisis in the Arab world triggered high global oil prices.

Overall inflation rate, which is driven by food and fuel prices increased from 6.54 per cent in February last year, to a peak of 19.72 per cent in November the same year.

The shilling weakened to an-all time low against major international currency to exchange at Sh101.3 per dollar in September last year.

Imports of oil, machinery and raw materials grew faster than exports.

This  resulted into a widening current account deficit estimated at 10 per cent of the gross domestic product towards mid last year.