Treasury downgrades 2017 economic outlook 5.1pc from 5.9pc

Kenya’s National Treasury has revised the 2017 Economic Outlook forecast to 5.1 percent from 5.9 percent attributed to drought and the political uncertainty.

“Revenue performance lagged behind and with investors adopting a wait-and-see attitude, so overall we are revising our growth to about five percent. With risks of course,” Henry Rotich, the Treasury Cabinet Secretary.

The economy expanded by 4.7 percent in the first quarter of 2017 compared to 5.3 percent same period in 2016.

The slowdown was also witnessed in the second quarter as the economic growth slowed to five percent compared to 6.3 percent in quarter two in 2016.

Further, the  Balance of Payments position worsened due to widening current account deficit, which deteriorated to 6.2 percent of GDP from 5.3 percent recorded in Q2’2016, as the 15.5 percent increment in imports could not be offset by the minimal increase in the exports, which grew marginally by 2.9 percent.

Diaspora remittances continue to increase as they registered a 5.1 percent growth to Kshs 47.6 bn from Kshs 45.3 bn recorded in Q2’2016.

Read: Diaspora Remittances to Kenya rise 4.12pc in first half of the year

The net public debt position grew by 27.8 percent to Kshs 2.3 tn in June from Kshs 1.7 tn in June 2016, mainly from commercial banks loans.

However, Cytonn Investments view is that “We expect the economy to normalise once the country takes to the polls, the re-run is concluded, and uncertainty dissipates, with Kenya’s growth fundamentals remaining strong and intact.”

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However, “The government should strive to manage the country’s debt levels going forward by enforcing efficient tax collection methods, involving the private sector in development through more Public-Private Partnerships (PPPs) and reducing recurrent expenditure that currently accounts for 58.8 percent of the 2017/2018 budget.”

Moody’s Investors Service has placed the B1 long-term issuer rating of the government of Kenya on review for downgrade due to persistent primary deficits, high borrowing costs continue to drive government indebtedness higher.

Read: Kenya’s debt burden to rise due to deficits and borrowing costs – Moody’s

The Central Bank of Kenya Governor Dr Patrick Njoroge in September said they are not certain how the growth outlook would be like,  “We do not have a crystal ball to tell you how Kenya’s growth outlook for 2017 will be like.”

Read: Kenya’s National Treasury retains  inflation target range at 5pc