Kenya’s economy forecasted to grow in 2018

Despite threats of drought and budget deficits, government officials say the economy is likely to grow by 5.8 percent this year.

Kenya’s Finance Ministry is confident the economy will grow to 5.8 percent this year, after drought and political turmoil stifled growth to an estimated 4.5 percent in 2017.

Kenya’s economy is largely dependent on farming and tourism. Minister of Finance Henry Rotich, acknowledged that risks to the economy remained in unfavourable weather conditions and pressure from the public for widespread economic and political reform. In September last year, the Supreme Court ruled that the country’s August 8 presidential election was invalid. There has also been pressure from the public to address recurrent expenditure.

But National Treasury supported the Finance Ministry’s positive outlook, saying in a statement that an estimated USD 2 billion had been raised for a controversial new sovereign bond issue. According to the department, the bond is to be issued in two equal tranches of 10 years at a coupon of 7.25 percent and 30 years at a coupon of 8.25 percent.

Treasury was quick to point out that the indication of confidence from international investors in the process could be seen through the nearly USD 14 billion in bids it received.

Not everyone shares government’s confidence. According to East African newspaper, at least one leading economist contends that Kenya should expect only a modest economic recovery of 4.6 percent this year and 5.4 percent next year.

The publication quoted Standard Chartered Bank chief economist for Africa and Middle East, Razia Khan, who said risk factors would make it difficult for government to undertake any tangible fiscal consolidation.

Ms. Khan said said in 2017, the country’s GDP plummeted to 4.5 percent from 5.8 percent in 2016, due to severe drought and a prolonged electioneering period.

She said Kenya’s prospects for better economic growth therefore appeared dim for 2018 as the economy would be overshadowed by a credit squeeze, ballooning public debt and rising oil prices.

LEX Africa Kenyan member is Kaplan & Stratton