Drought, interest caps seen slowing economic growth in 2017

Despite the economy growing at 5.8 percent, the government needs to brace itself for hard times.

Persistent drought has hampered growth in the country with Kenya National Bureau of Statistics projecting lower growth in agriculture sector in 2017 than 2016.

Depressed rains in 2017 are likely to have a negative on growing crops, production of livestock electricity generation and water supply.

Kenya National Bureau of Statistics (KNBS) Director General Zachary Mwangi said due to share of agricultural contribution to the GDP there will be lower demand for goods and services in 2017.

“The performance of Kenya’s economy in 2017 is likely to be determined largely by internal factors and external factors are likely to shape the economy but to a lesser extent. We note that the first quarter of 2017 was somehow not favoured by the prolonged drought and the key crop growing regions are expected to receive late and inadequate rains. The performance of the agricultural sector is therefore likely to be slow,” Mr Mwangi said.

The agriculture sector decelerated growth of 4.4 percent in 2016 from a revised growth of 7.2 percent. Tea and coffee production increased by 18.5 percent and 10.8 percent respectively.

In manufacturing sector there was declined output owing to the limited access to loans following the introduction of interest rate caps

Credit to the manufacturing sector decreased by 4.6 percent from Sh290.9 billion in 2015 to Sh277.4 billion in 2016.

Devolution and Planning Cabinet Secretary Mwangi Kiunjuri said some sectors such as transport, tourism, information and communication technology, building and construction, energy are expected to continue in the current growth trajectory.

“Through the government’s commitment in creating an enabling environment for doing business in key areas such as on going public infrastructure development that is roads and construction, tourism which has had a remarkable environment as it has benefited from improved security. Another important sector that recorded significant growth is the ICT which grew by 9.7 percent,” Mr Kiunjuri said.

Already the World Bank and the International Monetary fund have revised Kenya’s 2017 prospects to 5.5 percent.

The upcoming general election is also seen a factor that will slow growth.