The global rating agency, Fitch, has lowered its outlook on Kenya’s sovereign debt to ‘negative’ from ‘stable’, citing a projected slowdown in Kenya’s GDP growth this year due to the August 9 election jitters and continued fiscal pressures.
The agency said a bruising presidential poll poses the biggest threat to Kenya’s economic recovery since the Covid-19 shocks last year.
“The negative outlook reflects uncertainty about planned fiscal consolidation and risks to economic growth around the August 2022 general election,” said Fitch in a statement.
“Furthermore, the surge in global commodity prices puts upward pressure on inflation and the current account deficit.”
Fitch affirmed Kenya’s rating at B+ which signifies higher relative risk, with a more-than-average chance of default.
The rating firm sees economic activity expanding six percent this year with the service sectors continuing their post-pandemic recovery and agriculture recovering from negative growth in 2021 owing to adverse weather conditions.
“We forecast growth to slow to six percent, as the August 2022 general election poses downside risks to growth in the second quarter and third quarter of 2022,” said the agency.
“Our base case sees a moderate level of disruption in line with the 2017 election but well below the violence experienced in 2007 and 2012.”
Kenya’s economy has a history of slowing down during election years when firms put investment decisions on hold, pending a return to normalcy.
Economic growth slowed to 4.81 percent in 2017 as a result of the bitterly-contested presidential poll from 5.88 percent a year earlier. The deadly 2007 presidential poll sank the economy to a growth of 0.23 percent from 6.8 percent the year before.