Kenya's economic growth to slowdown in 2017

Tuesday January 31 2017

The Central Bank of Kenya (CBK) has warned that 2017 is likely to be a difficult year with the economy expected to contract to 5.7 per cent, from 5.9 per cent last year, as a result of drought, Trump policies and Brexit.

“If this dry weather persists then the growth of the economy in quarter 1 (January-March 2017) will be less than expected,” CBK Governor Patrick Njoroge told reporters on Tuesday.

Kenyans are already feeling the pinch owing to increased food prices and water shortage due to the prevailing drought.

The Kenya National Bureau of Statistics said Tuesday inflation rose to 6.99 per cent in January, up from 6.35 per cent in December on account of rising food and electricity prices.

“We are also beginning to see a lot more volatility in the global markets due to uncertainty surrounding the new policies of the US administration,” Dr Njoroge said.

The regulator said the country’s apparel and textile industry faces a grim outlook after new US President Donald Trump’s proposed protectionist policies that could lead to closure of several companies and job losses at the Export Processing Zone (EPZ). The special economic zone employs more than 30,000 people.


At stake too, the Bank said, is $160 million worth of remittances that Kenyans residing in the US send home.

“We are in this age of uncertainty… We have insured ourselves but it is not enough,” Dr Njoroge warned.

The US-Africa trade has fallen significantly in recent years, mostly as the US shale boom reduced the need for African crude oil and there are fears that President Trump’s ‘America first’ policy could harm a number of African countries that still benefit from Agoa. However, Mr Trump’s initial targets seem to be China and Mexico.

CBK expects the current account deficit to widen to over six per cent compared to 5.5 per cent in 2016 as the country continues to import more than it exports.

Kenya exports 5.3 per cent of its produce to the United States under the African Growth and Opportunity Act (Agoa) of which 93 per cent of these is apparel and textile.

In 2015, the US Congress sanctioned the extension of the preferential trade pact with sub-Saharan African countries by 10 more years.

READ: Agoa treaty facing possible repeal in Trump administration

The trade agreement allows countries such as Kenya to export goods to the US market without paying tax.

The International Monetary Fund (IMF) and the World Bank are also wary of the growth prospects of Kenya’s economy in the run up to the August elections.

“The slowdown in credit to the private sector and uncertainties related to the general elections may contain the growth momentum,” Armando Morales, the IMF Resident Representative in Kenya said.