Prolonged drought pushes down Kenya growth outlook to 5.6pc

World’s leading banks, consultancies and think-tanks have marginally downgraded Kenya’s growth prospects for 2019, largely citing the dampening impact of prolonged drought in the first quarter of the year.

A consensus growth outlook for August from 14 global firms projects that the country’s economy is likely to expand by 5.6 per cent, 0.2 percentage points lower than last month’s forecast.

“Growth is set to moderate this year, with persistent drought conditions weighing on the agricultural and electricity supply sectors,” researchers at FocusEconomics, a Barcelona-based economic forecast and analysis firm that compiles the global forecast data on sub-Saharan Africa, wrote in this month’s report.

“Meanwhile, the interest rate cap will likely continue constraining the activity of SMEs.”

Gross domestic product (GDP) in the January-March period slowed to 5.6 percent from 6.5 percent a year earlier, Kenya National Bureau of Statistics (KNBS) reported at the end of June.

The statistics agency largely blamed the reduced expansion in economic activity, the lowest since the third quarter of 2017 when the country was embroiled in a bitterly-contested presidential election, on a slowdown in agro-processing. “Delayed rains curbed production and weighed on agro-processing industries, thus leading to a slowdown in the manufacturing sector,” FocusEconomics says in the report.

US largest lender, JPMorgan, has cut Kenya’s growth outlook by the largest margin of 0.4 percentage points to 5.6 percent.

It is followed by Washington-headquartered DuckerFrontier, the consultancy brand following last year’s acquisition of Ducker by Frontier Strategy Group, which has trimmed Kenya’s 2019 GDP forecast by 0.3 percentage points to 5.9 percent.

The International Monetary Fund (IMF) last week also downgraded Kenya’s growth projection by 0.1 percentage point to 5.7 percent, bringing it level with sister company World Bank Group’s forecast.

New York-based brokerage house Citigroup Global Markets, London-headquartered Euromonitor International and Goldman Sachs have, however, left their growth forecast unchanged at 5.8 percent.