Kenya Lowers Growth Forecast as Drought Cuts Food Output
Kenya Lowers Growth Forecast as Drought Cuts Food Output.
Growth estimate may be cut to as low as 5.5%: Rotich Interest-rate caps constraining credit to small business Kenya will cut its growth forecast to reflect the impact of a drought that slashed agricultural output in East Africa’s biggest economy and left the country short of its staple food, Treasury Secretary Henry Rotich said.
Economic growth will probably be 5.7 percent this year, compared with an earlier estimate of 5.9 percent to 6 percent, Rotich said in an interview Wednesday at his office in the capital, Nairobi.
The forecast may be reduced further to 5.5 percent once an assessment of the March-May rains is completed, he said.
That’s underpinning growth of the construction industry, he said, while tourism, one of the country’s biggest generators of foreign exchange, is also “picking up.” Lower Estimates Cutting its forecast will bring the Treasury’s estimates more in line with the World Bank and the International Monetary Fund, which have cut their predictions to 5.5 percent and 5.3 percent respectively.
The Charts That Show How Biggest Kenyan Banks Are Being Squeezed The government is trying to mitigate the impact of the caps by accelerating reforms that address the “root causes” of high interest rates in Kenya, Rotich said.
As the impact of reforms is felt “maybe the caps will become redundant over a period of time.” Credit to the private sector grew 4 percent in March, the slowest pace since 2003, according to central bank data.
“We don’t think that, from our standpoint, the caps are going to be sustainable for our economy,” Rotich said.
“Our preference is to let the markets decide.” Rotich declined to say when Kenya will return to the Eurobond market.
He said foreign debt sales would in future be used for “liquidity management,” as debt raised earlier matured, and the country could issue bonds with longer maturities after Senegal sold $1.1 billion of Eurobonds last month that will mature in 2033.