Market News

CBK bullish on economy in spite of repeat election jitters

Central Bank of Kenya Governor Patrick Njoroge. PHOTO | SALATON NJAU | NMG
Central Bank of Kenya Governor Patrick Njoroge. PHOTO | SALATON NJAU | NMG  

Favourable weather for agriculture and sustained public investment in infrastructure development will help cushion the economy against knocks of prolonged electioneering, the Central Bank of Kenya (CBK) has projected.

CBK Governor Patrick Njoroge said the economy will grow at 4.7 per cent as recorded in the first quarter of the year.

“We don’t see any factors that would combine to shave growth projections for 2017… let’s say upwards of 0.5 per cent,” he told a press briefing in Nairobi.

The Kenya Meteorological Department (KMD) has projected good rains in the main food basket areas for the rest of the year.

“Enhanced rainfall is expected over most agricultural areas of the country. It is also expected that the rainfall will be well distributed making it favourable for agricultural activities in most of the areas.

‘‘Farmers are, therefore, advised to take advantage and make use of the good rains to maximise crop production, ” the weatherman said in a forecast for the October-December short-rains season.

A prolonged drought early this year affected food production leading to a sharp rise in inflation. The country’s overall inflation peaked at 11.7 per cent in May but dropped in June and July as the return of rain improved food supplies.

Inflows from the peak tourism season between June and October and the projected expenditure on the repeat presidential election tentatively scheduled for October 17 are further expected to boost growth.

“This is additional stimulus that was completely unexpected. That will stimulate growth,” he said. The election will cost more than Sh15 billion, according to Treasury Cabinet Secretary Henry Rotich.

The Independent Electoral and Boundaries Commission (IEBC) has presented a Sh12.2 billion budget to the Treasury for review. Mr Rotich last week however said the total budget for the repeat poll could cross Sh15 billion when related activities — largely security measures — are factored in.

Dr Njoroge however warned that extended low activity in the post-election season would affect the economy.

“Consumers will delay their decisions if there is too much uncertainty,” he said. “That has ripple effects if you think of trade. If there is more noise there will also be delay in terms of government execution of products.”

The economy takes a dip every five years as businesses hold back investments awaiting elections outcome.

The violence witnessed following the disputed 2007/08 presidential election results has caused uncertainty in successive general elections in 2013 and 2017.