Growth forecasts promise to break Kenya’s poll curse

Deputy President William Ruto addressing a campaign rally at Water Sports Ground, Kilifi Town, Kilifi County County. PHOTO | JONAH MWANGI | DPPS

What you need to know:

Economists see Kenya’s economy expanding by at least five percent this year, marking the highest growth in an election year since the return of the multi-party political system more than 30 years ago.

Weeks to the August 9 polls, a monthly consensus outlook from 15 world-leading banks, consultancies and think-tanks has upgraded Kenya’s growth forecast by 0.2 percentage points despite cost of living crisis.

The economic forecasts, collected between July 12-19 by Barcelona-based FocusEconomics, project a consensus growth of 5.4 percent from 5.2 percent a month ago, barring violence from fallout arising from the election outcome.

Purchasing power

They project the activities are not likely to soften below five percent from last year’s 7.5 percent, which partly benefited from low-base effects after the pandemic shocks pushed the economy into a trough.

If that comes to pass, it will be the first time economy will overcome the election angst to expand more than five percent post the current multi-party political system despite a high inflation environment, which has eroded the purchasing power of the consumers.

Kenya is gearing up for yet another “high-stakes contest” presidential poll with Deputy President William Ruto and veteran opposition chief Raila Odinga widely seen as the leading candidates to succeed President Uhuru Kenyatta.

Expansion in Kenya’s economic activity has a history of slowing down in election years since the return of multi-party democracy more than 30 years ago.

The reduction in growth of the country’s real gross domestic product (GDP) — a measure of economic output adjusted to inflation — hurts creation of job opportunities, hitting casual labourers and staff on contract hardest.

Analysis of growth trends since 1992 shows the momentum in economic activities have softened 2.83 percent on average in election years, and recovered by an average of 2.08 percent in the year after the election fever.

“A crisis might stem from one or more of the losing candidates contesting the election result outside of

the courts,” analysts at FocusEconomics wrote in August forecast report last week.

“Our panellists have once again upwardly revised their growth forecasts for 2022 and see GDP expanding at one of the fastest rates in the region.”

Improved forecast

The FocusEconomics report cites Cote d'Ivoire (6.3 percent) as the only key economy in sub-Saharan Africa likely to grow faster than Kenya. The improved forecast came after the Kenya National Bureau of Statistics reported economy expanded 6.8 percent in the first quarter on the back of recovery in key sectors such as hospitality and transport.

Economists at Moody’s Analytics of the US are most optimistic on Kenya’s growth prospects after raising its outlook to 8.8 percent from 6.1 percent — suggesting the economy will likely not soften for the first time in post-multi-party democracy era.

Others with improved outlook this month are economists at Standard Chartered with a forecast of 5.5 percent from 4.8 percent and New York-headquartered JPMorgan (from 5.6 to 5.7 percent).

The remainder of the firms have kept their outlook steady.

These are UK’s Capital Economics (6.3 percent), American investment banker Goldman Sachs (6.2 percent), Fitch Ratings (6.0 percent), London’s Euromonitor International (5.5 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), HSBC (4.6 percent), Economist Intelligence Unit (4.5 percent), Washington-headquartered consultancy FrontierView (4.3 percent), Switzerland-based Julius Baer (4.1 percent) and Oxford Economics (4.1 percent).

Latest forecast from the Treasury, Central Bank of Kenya, International Monetary Fund and World Bank show growth of 6.7 percent, 5.9 percent, 5.7 percent and 5.5 percent, respectively.

“The fallout from the war in Ukraine, extreme weather events and a higher risk of debt distress are key factors to watch,” FocusEconomics analysts say.

During the last election in 2017, the 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.

The aftermath of the deadly December 2007 presidential sunk growth to 0.23 percent in 2008 from 6.85 percent, while in 2002 it slowed to 0.5 percent from 3.78 percent the year before.

The same trend was witnessed in 1997 when growth dropped to 0.48 from 4.15 percent, and in 1992 when it contracted to negative 0.8 percent from 1.44 percent on the onset of multiparty elections.

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Note: The results are not exact but very close to the actual.