By Steve Umidha
The National Treasury has lowered Kenya’s growth forecast owing to the impacts of tighter monetary policy and the El Nino rains which are expected to disrupt the country’s economic activities.
Treasury Cabinet Secretary Henry Rotich said yesterday the economy will expand by between 5.8 to 6 per cent against the 6.5 to 7 per cent that the government had initially predicted in the current financial budget – saying the downward revision reflects the economic performance of the first half of the year.
This is the second time the government has cut its own 2015 economic growth projection. In April this year, the exchequer trimmed the forecast from 6.5 per cent down to 5.3 per cent.
“There was slow performance of revenue collection and borrowing from the domestic market during the first quarter of FY 2015/16 and following the revised growth targets, we shall soon embark on aligning our revenue and expenditure forecasts for the full year and the medium term to reflect the new growth prospects,” said Rotich during the opening of the public hearing for the FY 2016/17 and medium term budget.
The announcement comes barely two days following a meeting by Central Bank’s monetary committee to review the country’s monetary policy which saw the lender retain its benchmark lending rate at 11.5 per cent as banks withdraw notices of higher interest rates.
Last month the World Bank (WB) raised similar concerns and further cited volatile shilling – now beginning to strengthen against the US dollar and the sluggish exports as some of the key indicators showing the country’s growth potential would not be as had earlier been anticipated.
International Monetary Fund (IMF) had also in September revised downwards its predictions for the country’s growth but said it was not expecting ‘a major revision.’
WB trimmed the country’s economic growth projection downwards to 5.4 per cent, lower than the previous estimate of six per cent and predicted the country would expand by 5.7 per cent in 2016 down from 6.6 per cent, while the multi-lateral lender IMF put the 2015 growth at 6.8 per cent from the initial 7.2 per cent due to the unfavourable economic conditions.
Rotich said that other than the impacts of El Nino rains and the snug monetary policy, the country was also still feeling the effects of the global economic crisis, travel advisories which affected tourism sector but expressed optimism that the government will initiate targeted interventions to reverse the situation.
“The government is committed to reducing the cost of doing business and improving the competitiveness of enterprises in Kenya. Also the desired growth we expect will have to be largely produced by the private sector,” he said.
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