The International Monetary Fund (IMF) has slashed Kenya’s growth forecast to 5.3 per cent on persistent drought, sluggish private sector credit growth and rising oil prices.
The Fund had earlier predicted the country’s economic growth rate will slow in 2017 but within the 5 to under 6 per cent range from nearly 6 per cent last year over the general election.
In its latest World Economic Outlook released on Monday, the IMF projected growth rate for 2017 at 5.3 per cent and 5.8 per cent for 2018.
The projection is the lowest made on Kenya this year.
Several agencies including the World Bank have projected the sub-six per cent growth though. Last week, the World Bank forecast Kenya’s GDP growth would decelerate to 5.5 per cent, a 0.5 percentage point mark down from the 2016 forecast over poll jitters and drought.
Economic challenges this year have included the slowdown in credit growth for the private sector and the rise in global oil prices.
In February, the Central Bank of Kenya downgraded economic growth forecast to 5.7 per cent in 2017 from 5.9 per cent last year, citing uncertainties in the global economy. The economy grew at 5.8 per cent in 2016.
The economy expanded by 5.7 per cent in the third quarter of 2016, a slight dip from the 6 per cent recorded in the third quarter of 2015 on the back of stunted growth in agriculture, manufacturing, real estate and construction sectors.
The economy ordinarily takes a dip every five years as businesses hold back investments awaiting the outcome of the elections.
A severe drought experienced in major agricultural areas of Kenya since the beginning of this year has caused substantial shocks in local food supplies as consumers struggle with rising prices and shortages of popular food items.
Inflation has hit a 57-month high due to rising food prices that have pushed the rate outside the government’s preferred ceiling.