Economists cut Kenya's 2017 growth projection

“Focus Economics panellists see the economy growing 5.8 per cent this year with next year seeing GDP growth decelerating slightly to 5.7 per cent, which is down 0.2 percentage points from last month’s projection,” stated the report in part.PHOTO: COURTESY

Economists have cut the growth projection for Kenya in 2017, citing the approaching general election and capping of interest rates.

The effects of amendments to the banking act passed two months ago capping interest rates have been cited as an additional factor that will impact negatively on the economy’s growth in 2017.

Data from economic think tank Focus Economics, however, indicates Kenya was spared the negative impacts of the commodity slump that has affected other commodity exporting countries in sub-Saharan Africa.

The latest forecast shows a modest five per cent cut in the expected six per cent growth rate widely predicted by Treasury Cabinet Secretary Henry Rotich and International Monetary Fund (IMF) officials.

“However, slowing private sector credit growth and rising political uncertainty regarding presidential elections in August next year will put pressure on growth,” reads the report in part.

STAFF LAY-OFFS

“Focus Economics panellists see the economy growing 5.8 per cent this year with next year seeing GDP growth decelerating slightly to 5.7 per cent, which is down 0.2 percentage points from last month’s projection,” stated the report in part.

In September, President Uhuru Kenyatta signed into law the Banking Amendment Act, 2016 that capped lending rates to within four per cent of the Central Bank’s base-lending rate, bringing the maximum rate a borrower could be charged to 14 per cent.

The move forced banks, which were lending at an average of 28 per cent, to revise their existing facilities downwards, leading to loud protests and intense lobbying from commercial banks.

Through the Kenya Bankers Association (KBA), commercial banks had argued that the new law would increase the cost of doing business and lead to job cuts. In the last month, several banks including Family Bank, First Community Bank and Sidian Bank have announced staff lay-offs.

The economists were however optimistic on the prospect of increased agricultural output over the coming months following the favourable weather reports in key food-growing counties.

Last month, the International Monetary Fund (IMF) revised the growth projection for Sub-Saharan Africa to a 20-year low, blaming drought, a commodity slump and slowdown in China’s economy and the global economy.

ECONOMIC SHOCKS

The IMF also indicated Kenya was largely unaffected by the external macro-economic shocks its neighbours are grappling, with the country expected to grow at 6 per cent alongside other countries such as Côte d’Ivoire, Ethiopia and Senegal.

Both Kenya and Uganda are several months away from making commercial use of newly-discovered oil deposits with Tanzania similarly behind on exploiting its new gas finds.