Global economists have marginally upgraded Kenya’s growth outlook for this year following the peaceful conclusion of a closely-contested presidential vote despite soaring cost of living and mounting public debt stress.
A consensus growth outlook from 14 world-leading banks, consultancies and think tanks shows economic activities could expand 5.5 percent this year, a 0.1 percentage-point rise over the month before the General Elections.
The forecasts suggest the economy will likely shrug off the historical election jitters to grow more than five percent for the first time in an election year since the advent of Kenya’s multi-party political system three decades ago.
The projected growth will, however, be softer than 7.5 percent last year largely due to the rising cost-of-living crisis, below-average rainfall and weakening shilling in a net import economy.
“Despite softening from 2021, GDP growth will be amongst the strongest in the region this year following several upward revisions from our panelists,” wrote analysts at Barcelona-based FocusEconomics, who compiled the outlook report between August 16 and 21.
“The slowdown [from last year’s] will be partly driven by tighter monetary policy, a weaker shilling and high inflation; all tempering demand. Additionally, extreme weather events and a higher risk of debt distress are key factors to watch.”
A seven-judge Supreme Court on Monday unanimously upheld the August 9 election of Deputy President William Ruto as the fifth Kenyan president after dismissing a petition by his closest rival Raila Odinga for lacking merit.
Dr Ruto, who won 50.49 percent of the presidential vote against Mr Odinga’s 48.8 percent, will formally assume power Tuesday next week.
The report shows two of the firms covered in the monthly survey upgraded Kenya’s growth forecast with a similar number trimming the growth outlook.
Those upbeat on growth are Switzerland-based banking group, Julius Baer, which has raised growth forecast by 1.4 percentage points to 5.5 percent and London’s Euromonitor International, which sees a 5.8 growth from 5.5 percent previously.
However, Washington-headquartered consultancy FrontierView and Fitch Ratings have both cut forecast by 0.3 percentage points to 4.0 and 5.7 percent, respectively, according to FocusEconomics.
Economists who have kept their forecast steady are those at Moody’s Analytics (8.8 percent), London’s Standard Chartered (5.5 percent), UK’s Capital Economics (6.3 percent), American investment banker Goldman Sachs (6.2 percent), Paris-based BNP Paribas (5.4 percent) and Fitch Solutions (5.0 percent).
Others are American brokerage house Citigroup Global Markets (5.0 percent), Fitch Solutions (5.0 percent), HSBC (4.6 percent), Economist Intelligence Unit (4.5 percent) and Oxford Economics (4.1 percent).
The consensus forecast matches that of the World Bank Group (in June) but is marginally stronger than Central Bank of Kenya’s 5.4 percent.
“[The forecast] … is a pretty solid growth in 2022 compared with other economies given the external shocks that we are still navigating through and our own internal shocks that we have to contain,” CBK Governor Patrick Njoroge said on July 28.
Kenya’s real gross economic product (GDP) — a measure of economic output adjusted to inflation — has a history of slowing down during election years when firms put investment decisions on ice pending a return to normalcy in the political landscape.
During the last election in 2017, economic growth slowed to 3.82 percent from 4.21 percent the year before, while in 2013 it decelerated to 3.80 percent from 4.57 percent, according to GDP figures which have been revised following last year’s rebasing of the economy.
Kenya Bankers Association (KBA), an industry lobby, had assessed lower economic risk levels ahead of the August 9 presidential vote compared with previous elections.
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“Something that we have noticed over the last few electoral cycles is that there’s a bit of disconnect between the business environment and the cycle where the anticipation of there being disturbances and disruption in the economic activity have become less and less,” KBA chief executive Habil Olaka said on August 2.
“We saw in 2017 there was less of disruptions and this time we are seeing more of economic activity … picking up despite the fact that there is political excitement going on in the run to the elections.”