Poll uncertainty clouding Kenya growth, say analysts

A busy street in downtown Nairobi, Global economists warn Kenya this year risks growing at the slowest pace in five years. FILE PHOTO | NMG 

By LYNET IGADWAH

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Summary

• Analysts say the the prolonged electoral process is likely to affect economic growth as it increases policy uncertainty, which in turn impacts negatively on productive economic decisions such as investment and saving.
• Barcelona-based FocusEconomics has predicted a lower growth of 4.9 per cent even before the Supreme Court made its ruling.
• That would be the slowest growth since 2012 when national wealth grew by 4.6 per cent.

The bearish attitude of investors is set to last longer after the Supreme Court upheld an election petition lodged by the Opposition, pulling Kenya’s growth to new lows.

The court last week ordered fresh presidential elections within 60 days, citing irregularities in how the exercise was conducted.

Analysts say the the prolonged electoral process is likely to affect economic growth as it increases policy uncertainty, which in turn impacts negatively on productive economic decisions such as investment and saving.

“In the short term, we are likely to see the markets weakening as political tension resumes over the next two months,” said Gavin Serkin, an economic analyst with Exotix Capital.

The views are in sync with observation of global economists who have warned Kenya this year risks growing at the slowest pace in five years citing long electoral process and drought.

A forecast by Barcelona-based FocusEconomics, an economic analysis firm which tracks growth projection from leading banks, consultancies and think-tanks, predicted a lower growth of 4.9 per cent even before the Supreme Court made its ruling.

That would be the slowest growth since 2012 when national wealth grew by 4.6 per cent.

So far, there has been subdued economic activity with data produced by the Kenya Ports Authority indicating that importers are generally ordering consumer goods like cars and grains at the expense of inputs like clinker and steel.

Barely an hour after the Friday ruling by the country’s apex court, the Kenya shilling fell by as much as 0.32 per cent, as trading at the Nairobi Securities Exchange was temporarily halted because of panicky transactions, especially by foreign investors.

“Markets hate uncertainty and clearly the Supreme Court’s decision has injected an unprecedented amount of uncertainty into the equation,” Aly-Khan Satchu, the chief executive of Rich Management, an investment advisory firm.

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The historical ruling by the court has however been lauded with many saying that it will have a positive impact on the country going forward.
“This unprecedented ruling gives a much-needed boost of confidence in the system, with the population suddenly seeing election irregularities being handled correctly via the courts. This will prove transformative for the future,” said Serkin.