Economy

Debt, poll seen as major shocks to economic revival

econ

President Uhuru Kenyatta makes his speech during Mashujaa Day celebrations at Wang’uru Stadium in Kirinyaga County on October 20, 2021, where he announced the lifting of an 18-month countrywide curfew. PHOTO | JOSEPH KANYI | NMG

BDgeneric_logo

Summary

  • Global economists see economic activity expanding 5.5 percent in 2022, a largely flat growth rate compared with a 5.34 percent consensus outlook for this year.
  • The forecast is contained in the November outlook report compiled by Barcelona-based FocusEconomics.
  • President Uhuru Kenyatta on October 20 stopped the nationwide nighttime curfew that had been in place since March 2020.

Rising external debt repayments and a bruising presidential poll pose the biggest threat to Kenya’s economic recovery from the pandemic shocks next year following the lifting of the 18-month nationwide curfew.

Global economists see economic activity expanding 5.5 percent in 2022, a largely flat growth rate compared with a 5.34 percent consensus outlook for this year — a rebound from 0.31 percent pandemic-induced contraction in 2020.

A consensus outlook from a panel of economists drawn from 16 global banks, consultancies and think-tanks suggests falling Covid-19 infections amid gradual expansion in the uptake of vaccines has boosted confidence in the economy and is aiding recovery inactivity.

The forecast is contained in the November outlook report compiled by Barcelona-based FocusEconomics.

“Next year, GDP is projected to grow robustly, as looser Covid-19 restrictions aid the recovery in domestic activity while accelerating vaccination rates in the wider region should help the external sector (exports),” analysts at FocusEconomics wrote in the November outlook report on Kenya.

“A projected increase in external public debt levels poses a key downside risk, while the August 2022 presidential elections cloud the outlook.”

President Uhuru Kenyatta on October 20 stopped the nationwide nighttime curfew that had been in place since March 2020 to stem the spread of the coronavirus, boosting recovery in hardest-hit sectors such as hospitality, retail and transport.

Economic activity as measured by gross domestic product (GDP) contracted 0.31 percent last year on the back of Covid-related partial trade shutdowns and travel restrictions. Growth is seen rebounding this year to punch above the pre-pandemic five percent rate.

Economists at Moody’s Analytics see Kenya’s economy growing faster in 2022 at 8.6 percent from a projected 5.6 percent this year, while their counterparts at JPMorgan, US largest lender, have forecast growth to accelerate to six percent from 4.5 percent estimate for 2021.

Analysts at American investment bank Goldman Sachs, however, project Kenya’s economic growth to decelerate to 4.5 percent from 6.0 percent this year, while Fitch Ratings see a drop to 5.0 percent from 5.5 percent. Kenya’s economy has a history of slowing down during election years when firms put investment decisions on hold pending a return to normalcy in the political landscape.

Economic growth, for example, slowed to 4.81 percent in 2017 as a result of the bitterly-contested presidential poll from 5.88 percent a year earlier.

The same trend was seen in 2008 when the aftermath of the deadly December 2007 presidential election sank economy to a growth to 0.23 percent from 6.865 percent the year before. The notable exception was in 2013 when economy grew 5.8 percent after the Supreme Court amicably resolved a presidential dispute compared with 4.56 percent the year before.

[email protected]