Kenya to grow by over 5%

Economic growth in Kenya will accelerate this year but wide current account and budget deficits and inflationary pressures may deter investors, a Reuters poll found yesterday.

Economic growth in Kenya will accelerate this year but wide current account and budget deficits and inflationary pressures may deter investors, a Reuters poll found yesterday.

Gross domestic product should grow by 5.5 per cent this year, according to the survey of 15 economists and analysts, published a day after a sharp selloff on emerging markets, caused by strong signals that US monetary stimulus will be scaled back.

The growth estimate, unchanged from recent Reuters polls, was up from an expansion of 4.6 per cent last year but below the 7 per cent Kenya reached before the violent aftermath to national elections in 2007.

Kenya’s wide current account deficit will narrow slightly to 10.1 per cent of gross domestic product (GDP) this year from 11.3 per cent last, according to a median forecast from the poll, which was collated over the last week.

The fiscal purse also looks stretched, with the deficit on the 2013/14 budget tabled last week expected to rise to 7.9 per cent of GDP.

The 2011/12 deficit was 6.9 per cent, and the government projected a narrower gap in the 2012/13 fiscal year that ends this month.

“An accommodative fiscal and monetary policy will boost economic growth in the near term,” said Mark Bohlund, senior economist at IHS Global Insight.

“The large twin deficit constitutes a risk to macroeconomic stability as it makes Kenya more vulnerable to shifts in investor sentiment.”

 

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