Kenya’s economy projected to expand by 5.5pc this year

Citibank’s Head economist for Africa David Cowan says infrastructure constraints remain amongst the major issues of concern in the country.

By James Anyanzwa

Citibank expects Kenyan economy to grow by 5.5 per cent this year supported by growth in the manufacturing and services sector.

This is compared to a growth rate of 4.7 per cent last year.

But the Government’s plan to revise its calculations of the gross domestic product (GDP) could see the total value of all goods and services produced in the country rise by an estimated 15-20 per cent this year, according to the US-based financial conglomerate. 

“The provisional indications are that the revision will be around 15 to 20 per cent. This would increase GDP in 2013 to around $50-53 billion (Sh4.35 trillion to Sh4.611 trillion) from our estimate of its current level of around $44.1 billion Sh3.84 trillion in 2013,” says David Cowan, the bank’s Head Economist for Africa.

According to Citi, the economy is unlikely to grow at 5.8 per cent as projected by the National Treasury.

The bank says the economy is grappling with serious challenges including drought, infrastructure constraints and insecurity, which have a negative impact on tourism and the wider corporate investments.

Mr Cowan says the rebound in economic activities after last year’s general elections has been weaker than expected. He says the economic growth prospects could also be undermined by food price inflation, which is potentially picking up.

Constraint

“We at Citibank forecast a growth of 5.5 per cent in 2014 rising to 6.1 per cent in 2015 but infrastructure constraint is still very much an issue holding a growth pick up,” he said.

This comes amid fears that poor rainfall which has hit most of the country’s agricultural areas during this crucial planting, including the North Rift region—Kenya’s grain basket— and rising incidents of terrorist attacks could further   dampen economic prospects this year.

Cowan argues that though economic growth appears to have picked up marginally during the first half of 2014, infrastructure constraints remain amongst the major issues of concern in the country.

 “In the recent years we have had a strong on-going basis of service sector driven growth. With steady support from manufacturing sector our basic assumptions is that this remains broadly unchanged,” Cowan told The Standard in an interview.

 “So we think the key to forecasting growth is have a firm view on the more variable growth factors around this,” he added.

Targeted growth

It is argued that Kenyans are reaping the gains of a smooth political dispensation and sound macroeconomic conditions, but much more remains to be done to achieve the targeted growth rate of 10 per cent envisaged in Vision 2030.

Kenya’s economic performance last year fell below expectations with the level of economic activities in the country staggering at an average growth rate of 4.6 per cent.

Apparently, East Africa’s largest economy is now trailing its counterparts in the region, growing at a pace, which is slower than that of Uganda (5.6pc), Tanzania (7pc) and Rwanda 7.5 per cent.