Analysts have warned of a bleak future for the economy in the wake of a fresh political impasse after Opposition leader Raila Odinga opted out of the October 26 repeat presidential poll.
Economists said yesterday the fresh political row was likely to deal a further blow to the economy, especially the shilling and the stock market.
This is despite the shilling holding steady against the dollar, with Central Bank of Kenya data quoting the local currency at Sh103.225 against the greenback yesterday morning, similar to Monday’s trading.
Investors at the Nairobi Securities Exchange (NSE), however, lost Sh15 billion in paper wealth, with capitalisation standing at Sh2.34 trillion by close of trading.
NSE’s benchmark 20-share index recorded a 1.4 per cent decline by the end of trading yesterday as Opposition supporters took to the streets for the second time this week in their push for electoral reforms after Raila pulled out of the repeat poll on Tuesday.
The index - used to track the performance of the NSE equities (shares) market - dropped to a four-month low of 3644.80 points. The bond market, however, rose fourfold during yesterday’s trading, with turnover reaching Sh809 million compared to Monday’s Sh212 million.
Analysts warned the growing political uncertainty could lead to depreciation of the local currency, forcing CBK’s hand to stem volatility. The stock market, they said, could also see a bear run - a period of time when prices fall on a financial market - if investors stay away.
“Because of political uncertainty, strategies have changed and the shilling looks more vulnerable,” a trader from a commercial bank was quoted as saying by a Reuters’ report.
Kenya’s business community, led by the Kenya Association of Manufacturers and the Private Sector Alliance of Kenya (Kepsa), said the prolonged election cycle was hurting local businesses and the country’s investor profile.
“Politics around the world impacts businesses and companies globally have mechanisms of coping with these disruptions. But when there is an extended political activity, it becomes difficult for business and the economy to withstand the continued politicking,” said Kepsa Chief Executive Carole Kariuki.
The annulling of the August 8 Presidential Election by the Supreme Court and the withdrawal of Raila Odinga’s candidature from the planned October 26 repeat election has put the country on edge for a prolonged period.
“For the past two years, Kenya has suffered a few setbacks which have impacted our economic growth rate,” said KAM Chief Executive Phyllis Wakiaga.