Global economists have projected Kenya’s budget deficit will be wider than the 7.5 percent of gross domestic product (GDP) estimated in the Treasury’s budget for this financial year.
They forecast the country's fiscal deficit to narrow to an average of 7.9 percent of GDP this fiscal year from an estimated 8.7 percent in the previous one.
The projection is contained in July’s consensus forecast report for sub-Saharan Africa compiled by Barcelona-based FocusEconomics.
Global economists have projected Kenya’s budget deficit will be wider than the 7.5 percent of gross domestic product (GDP) estimated in the Treasury’s budget for this financial year, saying the targets of economic growth and tax receipts are unlikely to be met.
A consensus outlook from 11 of the world’s leading banks, consultancies and think tanks has forecast fiscal deficit to narrow to an average of 7.9 percent of gross domestic product (GDP) this fiscal year from an estimated 8.7 percent in the previous one.
The projection is contained in July’s consensus forecast report for sub-Saharan Africa compiled by Barcelona-based FocusEconomics.
The Treasury sees the budget deficit — filled through borrowing — narrowing steadily to 3.6 percent in the next three years based on expenditure cuts and revenue growth.
“The government’s ambitious multi-year fiscal consolidation plan will prove difficult, given a track record of ineffective fiscal policy implementation,” Jee-A van der Linde, economist at Oxford Economics, was quoted in the FocusEconomic’s outlook report on Kenya. “It will take time to bring the fiscal deficit to more sustainable levels.”
Fitch Ratings has projected the highest fiscal deficit for Kenya at 9.0 percent, followed by Economist Intelligence Unit (8.8 percent), Goldman Sachs (8.4 percent), HSBC (8.2 percent) and JPMorgan (8.0 percent).
Moody’s Analytics has forecast the lowest budget hole at 6.8 percent of GDP followed by Fitch Solutions (6.9 percent), Citigroup Global Markets (7.7 percent), BNP Paribas (7.8 percent), Oxford Economics (7.9 percent) and Euromonitor International (7.9 percent).
Kenya’s fiscal deficit averaged 7.6 percent between June 2013 and June 2020 against a target of 4.0 percent, an analysis by the Parliamentary Budget Office (PBO) shows.
This (3.6 percent average deviation in seven years) captures the inability of realistically forecasting future revenues and fiscal deficits and implies that the decisions in the overall budget are not being guided by reality but rather by the need to indicate a favourable fiscal position,” the PBO wrote in its latest budget outlook report.
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