By Rawlings Otini

Kenya continues to receive conflicting economic growth projections, with the latest one dampening hopes the country will record an above-six per cent growth.

Coming on the back of a slowdown in the farming sector, which accounts for nearly a third of output, manufacturing and transport, the International Monetary Fund (IMF) yesterday cut Kenya’s 2019 economic growth outlook to 5.6 per cent from 5.8 per cent it predicted in April.

The IMF’s latest forecast is lower than the government’s. 

In September, Treasury forecast the economy would grow by six per cent this year after 6.3 per cent growth in 2018.

Data from the Kenya National Bureau of Statistics last month showed the economy grew by 5.6 per cent in the second quarter of this year, down from 6.4 per cent in the same period a year earlier.

With a well-diversified economy that does not depend on a single commodity or sector, Kenya has enjoyed rapid growth in recent years, but critics say it is not enough to lift many citizens out of poverty.

While IMF did not explain the reason it cut the growth projection for the year, analysts say Kenya’s growth is largely pinned on rainfall, debt and corruption.

Kenya experienced delayed rainfall and is struggling with debt and corruption.

Cost of living

IMF, through the Global Economic Outlook report released on Tuesday, also revised Kenya’s 2020 growth upwards to six from 5.9 per cent adding that the cost of living will drop next year making life more bearable for most Kenyans.

Analysts, however, say that growth will largely depend on weather conditions next year since Kenya is largely an agricultural economy.

“If we get more rains, then six percent is achievable, however the predicted growth rate is very modest for an economy with such human talent,” said economist Robert Shaw.

As well as runaway spending, the government has been criticised for failing to stamp out widespread corruption.

Critics also accuse the government of saddling future generations with too much debt. 

The government says higher borrowing is required to fund infrastructure.

Shaw says that Kenya should be growing at about nine per cent, adding that misuse of debt and corruption are holding the country back.

“We are using loans to pay off old debt,” said Shaw.

IMF says inflation will drop from 5.6 per cent this year to 5.3 per cent in 2020. 

The projections come amid concerns that the country is borrowing and using the debt to pay off past debt thus squeezing money out of the economy.

Balance of payments

Data from the Kenya National Bureau of Statistics last month showed the economy grew by 5.6 per cent in the second quarter of the year, down from 6.4 per cent in the same period a year earlier. 

The report also predicts that Kenya’s balance of payments, which is the difference between the money coming in and money leaving the country, will also improve to -4.6 from -4.7.

This means that money from foreign direct investments, diaspora inflows, exports among others, will increase and help offset the money spent on imports and debt repayments. 

Several business owners in Nairobi say business has been good even as the government adopts austerity measures by freezing hiring and cutting travel budgets, among others.

“For sustainable growth to be achieved, Kenya must  invest in irrigation and water management infrastructure and leverage disruptive technologies to deliver agricultural services,” says Ladisy Chengula, World Bank lead agriculture economist.

The country, she said, needs to invest in accurate agro-weather, market information and advisory services.

Multiple companies in various industries have been laying off people across various industries from banking to manufacturing.

Private sector growth has also been hit by poor credit extension from the banking sector.

Additional reporting by Reuters