Kenya’s economy will expand at the fastest pace in an election year since the onset of the multiparty political system two decades ago, supported by increased expenditure, a projection of global economists suggests.
A consensus outlook from 14 world-leading banks, consultancies and think-tanks suggests the economy— as measured by gross domestic product (GDP) — will likely grow 5.4 percent in 2022.
“This year, GDP is seen expanding at a healthy rate due to a sustained rise in household and capital spending,” analysts at Barcelona-based FocusEconomics, who compiled the outlook data between January 18 and 23, wrote in a report on Kenya last week.
“Solid government consumption and a largely accommodative monetary stance will provide an additional boost.”
Although the projected growth signals a slowdown from last year’s which is estimated at about eight percent, it will be the fastest in an election year since the last single-party presidential elections in 1988.
The forecast report has flagged reliance on foreign borrowing to fund infrastructure projects as the biggest downside risk to the outlook. Economists at Moody’s Analytics project a growth of 8.6 percent followed by UK’s Capital Economics (6.5 percent), US’s JPMorgan (6.3 percent), Switzerland-based Julius Baer (5.5 percent) and London-headquartered Euromonitor International (5.3 percent).
Economists who see growth of below five percent are those at Washington-headquartered consultancy FrontierView (4.9 percent), Standard Chartered (4.8 percent), Economist Intelligence Unit (4.5 percent) and Oxford Economics (4.3 percent).Others are American investment bank Goldman Sachs (5.2 percent), New York-based brokerage house Citigroup Global Markets (5.1 percent), while UK’s HSBC, Fitch Solutions and Fitch Ratings have each forecast a 5 percent growth for Kenya.
“A shift towards looser fiscal policy seems baked in as the authorities provide more support ahead of August’s election,” analysts at Capital Economics wrote in a report last Friday.
The consensus growth outlook is lower than Central Bank of Kenya’s 5.9 percent, but higher than World Bank Group’s 4.7 percent outlook in January 2022. Kenya’s real GDP — a measure of economic output adjusted to inflation—has a history of slowing down during election years when firms put investment decisions on hold pending a return to normalcy in the political landscape.
“We have seen election before —and actually saw double elections five years ago — and another one five years earlier and et cetera,” CBK Governor Patrick Njoroge said last Thursday.
“The fear (of political risk) is more speculative, but let’s just say those are scenarios of a (5.9 percent) baseline.”
During the last election in 2017, the economic growth slowed to 3.82 percent from 4.21 percent the year before, while in 2013 it decelerated to 3.80 percent from 4.57 percent, according to GDP figures which have been revised following last year’s rebasing of the economy.
The aftermath of the deadly December 2007 presidential sunk growth to 0.23 percent in 2008 from 6.85 percent, while in 2002 it slowed to 0.5 percent from 3.78 percent the year before.
The same trend was witnessed in 1997 when growth dropped to 0.48 from 4.15 percent, and in 1992 when it contracted to negative 0.8 percent from 1.44 percent on the onset of multiparty elections.
“Irrespective of the eventual winner (in August poll), the campaign promises of both leading candidates suggest that a new government would ramp up spending,” the Capital Economics analysts said.
Deputy President William Ruto and ODM Party leader Raila Odinga are the leading candidates to succeed President Uhuru Kenyatta who will leave office at the end of constitutional two-term of five years each.
cmunda@ke.nationmedia.com
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