Prolonged electoral period and drought to dim East Africa’s growth
11 months ago, 16 Jan 12:22
The confidence in the region’s three largest economies — Kenya, Tanzania and Uganda — will be determined by how they dust off the effects of two years of elections that brought about uncertainties and inflationary pressures. Citi economists say the region’s growth this year will lag that of Southern and West Africa’s, mostly because of the inflationary pressures and stiff competition for investment. “While the macroeconomic numbers in the sub-region remain positive, business sentiment is curtailed by two years of political uncertainty, strong competition and robust inflationary pressure, and there remain concerns about the fiscal and current account deficits,” said David Cowan, Citi Africa economist. Concerns However, he noted that this should improve this year, given that there will be no elections in the region. However, concerns about the weather and food price inflation and its impact on low income households and consumption still linger. The slow implementation of government infrastructure projects in the three countries is also going to be a concern this year, putting into focus the absorption of development funds, says the report titled Sub-Saharan Africa into 2018: Is a wider economic recovery starting to gain some traction? Already, Kenya’s Treasury Cabinet Secretary Henry Rotich has directed ministries and agencies to prioritise the completion of multi-million dollar infrastructure and development projects around the country before embarking on others. “State corporations should ensure that adequate funding is provided to priority projects and aligned with emerging government priority areas. In preparing the capital budget, priority should be given to the funding of ongoing capital projects. “In this regard, state corporations are required to take into account all ongoing multiyear funding requirements of capital projects up to their completion before initiating new projects,” Mr Rotich said last week in a circular to ministries and department heads. According to Mr Cowan, the key growth outlook in Kenya is how quickly the country can deal with tensions surrounding the 2017 presidential elections and embark on consolidating its policies and actualising its development projects. Current account deficit “We think the election has already slowed growth and led to policy weakening in 2017. Despite this political and policy uncertainty, with robust foreign exchange reserves, a narrowing current account deficit and strong capital flows into Kenya, notably from the region, the Kenyan shilling has shown significant stability. This is unlikely to change in 2018 unless there was a more aggressive pick-up in inflation and deterioration in the fiscal position,” he said. Kenya’s growth this year is also expected to be at around 5 per cent, having decelerated to 4.4 per cent due to prolonged electoral politics and drought. This was the country’s lowest growth in five years and was mainly as a result of suppressed performance of key sectors of the economy — manufacturing, mining and finance. Tanzania In Tanzania, President John Magufuli continues to shake up the country in 2018, but it is still not clear whether he can reconcile his desire to tackle corruption and control the economy with an approach that is ...
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