Heightened political uncertainty coupled with the raging drought has prompted the International Monetary Fund to slash Kenya’s economic growth projection for 2017.
The Fund has lowered its economic growth projection to 5.0 percent, down from 5.3 percent with a warning that the growth is likely to tank further if the ongoing political stalemate persists.
Chief economist at Mentoria Consulting Ken Gichinga says growth is likely to be weakened further by credit crunch.
After four years of record breaking growth, a major political stand-off, severe drought and a crippling credit crunch have all conspired to dim economic growth in 2017.
Already economic growth for quarter one of 2017 has been disappointing at 4.7 percent compared to 5.9 percent in the same quarter of 2016. Analysts expect the second quarter to be worse.
The International Monetary Fund says economic expansion will drop from 5.9 percent in 2016 to 5.0 percent in 2017.
IMF cites prolonged political uncertainty, the interest capping law and the ongoing drought as reasons for their decision to slash its growth forecast. Gichinga says growth is likely to be weakened further by weakening credit crunch.
The NASA coalition has been organizing weekly protests in various parts of the country which has dampened the business environment.
Gichinga says if politicians fail to reach a compromise, economic growth will tank to below 5 percent, the worst in five years.
The economist also warns that the spending cap imposed by the national government is having a negative impact on the economy.
The government’s revenue collection for the fiscal year 2017/18 is behind target by close to 30 billion shillings due to lower collection from the customs department.
However the government is banking on improved rainfall and infrastructure spending to pick growth in 2017.