Election jitters, insecurity could dim growth

A slow down in growth of key economic sectors during the first three months (January –March) of this year will hurt the country’s economic growth prospects, warned fund managers.

PineBridge Investments fund managers cited deterioration of the European debt crisis, unfavorable weather conditions, security threats and uncertainty surrounding the timing of the next general election as key risks to the country’s economic outlook.

“We maintain our GDP growth projections for 2012 at between four and 4.5 per cent, but expect an acceleration to 5.2 per cent in 2013 on account of lower interest rates and higher infrastructure spending,” Edward Gitahi, a Senior Investment Manager told a press briefing in Nairobi yesterday. Kenya suffered an economic slowdown in the first quarter of 2012 registering a 3.5 per cent growth compared to 5.1 per cent recorded in a similar period last year.

Reduced credit to the private sector and high interest rate environment posed a dampening effect on growth of some key sectors of the economy, with growth in the construction sector dropping from seven per cent to 3.2 per cent, while the financial sector growth plummeted from 12.6 per cent to 3.8 per cent. The agricultural sector, however, increased from 0.2 per cent in the first quarter of 2011 to 2.3 per cent this year, on account of improved weather conditions.

“These sectors could continue with the sluggish performance for the rest of the year and pick up in 2013,” said Gitahi, adding that the tourism sector performance could slow down due to the pending elections and security threats.

By James Anyanzwa