Slowing growth and election fears

THE TOP risks to potentially stellar economic growth in Kenya this year were slowing credit growth and fears about violence in the run-up to elections, a poll found yesterday. The survey of 15 analysts taken over the past week suggested Kenya’s economy would grow 5.9 percent in 2017 and 6.1 percent in 2018. The economy was expanding at 5.7 percent in the third quarter of last year compared with 6 percent in the same period in 2015. A disputed Kenyan election in 2007 led to violence that left about 1 250 people dead. “Obviously, I join everyone in hoping that there is a peaceful and orderly result (this time). The vote in 2013 certainly shows that such a thing is possible,” Capital Economics Africa analyst John Ashbourne said. “Even so, we expect that growth will remain pretty strong this year.” Rafiq Raji, chief economist of Macroafricaintel, said he believed that apart from some habitual skirmishes, the polls would be by and large peaceful. The other main risk identified stemmed from the government capping commercial lending rates at 400 basis points above the central bank’s lending rate last September. This hurt already stressed private sector credit growth. High commercial lending rates are a problem in many parts of Africa. Ashbourne said the interest rate cap would be counter-effective, because it would discourage banks from lending to less credit-worthy clients, slowing credit extension. Another risk this year is the impact of persistent drought conditions in east Africa. Inflation is seen averaging 6.3 percent this year, in line with last year, before slowing to 5.7 percent in 2018.