Kenya: Gloomy Forecast for Economy
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The Nation (Nairobi)
9 October 2008
Posted to the web 10 October 2008
Kevin J Kelley and Justus Ondari
New York/Nairobi
Just weeks after praising Kenya's economic recovery, the International Monetary Fund warned on Wednesday that the country will be among six African states "hit hardest" by the global financial meltdown's effects on trade.
In its new World Economic Outlook report, the IMF predicts Kenya's economy will grow by 3.3 per cent this year - a downward revision from the 4 per cent growth rate through mid-2008 that IMF officials had cited at a briefing in Nairobi last month.
In Kenya, the local subsidiary of AIG Investment Bank, has also down-graded its growth projection from the 4.5 per cent announced in June, to 4.3 per cent.
"We project an economic growth rate of 4.3 per cent in 2008 and 5.2 per cent in 2009," AIG Investment (East Africa) Vice president, Mr Peter Wachira noted.
Inflation is expected to reach 25 per cent this year, one of the highest rates among African countries included in a survey in the IMF's new report.
The fund sees economic conditions improving for Kenya next year. It expects growth to quicken to a 6.4 per cent rate in 2009 while inflation falls sharply to 6.5 per cent.
Kenya is listed in the fund's report along with Benin, The Gambia, Madagascar, Rwanda and Sierra Leone as the oil-importing African countries projected to experience a 15-20 per cent deterioration in their terms of trade. That refers to the cost of a country's imports relative to its exports.
The IMF's assessment for Kenya, however, appears self-contradictory. The Africa section of the fund's report includes footnotes listing Kenya among the oil-importing countries that "stand to benefit from higher prices" for both metals and coffee.
Kenya lags behind neighbouring countries as well as sub-Saharan Africa as a whole in the IMF's latest growth forecast.
Tanzania's economy is expected to expand at a 7.5 per cent rate this year, while the growth rate for Uganda is projected to reach nearly 10 per cent in 2008. Growth across the sub-Saharan region will measure 6.1 per cent this year, the IMF says.
In a review of Kenya's economic performance released on October 1, the IMF said it "commended the Kenyan authorities for maintaining economic stability in the wake of the post-election turmoil in early 2008."
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The fund also praised the government's "sound macroeconomic policies and progress with economic reform in recent years, which have contributed to strong economic growth and poverty reduction."
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