CBK projects slowdown in Kenya's growth to 5.7pc this year

Central Bank of Kenya governor Patrick Njoroge. PHOTO | FILE 

By CHARLES MWANIKI, cmwaniki@ke.nationmdia.com

In Summary

• CBK Governor Patrick Njoroge said Tuesday that the growth in the first quarter of 2017 will be depressed, with Kenyans being forced to spend more for basic necessities such as food and water.
• The governor said that the economy grew by 5.9 per cent last year, only slightly lower than the official government expectation of six per cent.
• Dr Njoroge, however, played down the possible negative effects on the economy of the general election slated for August, terming it a cyclical event that will be outlasted by longer term fundamentals of the economy.

Central Bank of Kenya is projecting that Kenya’s economy will grow by 5.7 per cent in 2017, slowing down from last year’s 5.9 per cent due to the adverse effects of the prevailing drought.

CBK Governor Patrick Njoroge said Tuesday that the growth in the first quarter of 2017 will be depressed, with Kenyans being forced to spend more for basic necessities such as food and water.

The governor said that the economy grew by 5.9 per cent last year, only slightly lower than the official government expectation of six per cent.

“We are expecting growth of 5.7 per cent this year, taking into account the adverse effects of drought in the first quarter,” said the governor.

“Macroeconomic stability in inflation, adequate reserves, additional investment in infrastructure and private sector investment and consumption will contribute to this growth. However, we face some headwinds, most significantly external shocks linked to policies of the new US administration and the Brexit negotiations.”

Cyclical event

Dr Njoroge, however, played down the possible negative effects on the economy of the general election slated for August, terming it a cyclical event that will be outlasted by longer term fundamentals of the economy.

On the risk coming from the US, the governor said that Kenya may not have enough of a buffer to cover against a move by the US to cut Kenyan imports as part of a protectionist policy.

Exports to the US account for 5.3 per cent of Kenya’s total exports, with more than 90 per cent of goods sold to the US consisting of apparel under the Agoa pact.

He also cited the risk to Kenya’s and global financial markets should the US go ahead and deregulate its financial sector as promised by President Trump.

“If they roll back the regulations put in place after the financial crisis of 2008, we will see renewed potential for another financial crisis,” said Dr Njoroge.