Kenya: The Government hopes increased spending on infrastructure projects will revitalise economic activity and lift growth to more than five per cent this year.
The National Treasury says this would see the economy grow to levels sufficient enough to generate employment, pull millions of Kenyans out of poverty and curb the rising incidents of insecurity.
East Africa’s largest economy performed poorly in the third quarter (July-September) of last year, prompting technocrats at the Treasury to review growth prospects for 2013.
The growth forecast for last year was reduced to five per cent from 5.6 per cent.
However, optimism is building within Government circles and among fund managers over this year’s outlook.
Although the economy remains vulnerable to external shocks, existing macroeconomic fundamentals on exchange rates, inflation, interest rates and foreign exchange reserves point to some relative degree of stability in the local economy.
“We project a 5.8 per cent growth in 2014 due to credit expansion and investment spending by both central and county governments,” said Mr Justus Nyamunga, the director in charge of the economic affairs department at the Treasury.
Positive outlook
The projected growth is expected to be augmented by continued investments especially in roads, energy, ports and construction of the standard gauge railway (SGR) line.
Others include irrigation and value addition in agriculture, structural reforms, security reforms and continued investment in the social sectors of education, health and social protection.
The outlook for 2014 looks generally positive, with the International Monetary Fund forecasting six per cent economic growth for sub-Saharan African countries. The Nairobi Securities Exchange, which acts as a barometer for economic performance, has already broken new records, with the value of listed shares (market capitalisation) surpassing the Sh2 trillion mark.
Mobile phone operator Safaricom, whose share price had remained glued below the initial public offering (IPO) price of Sh5 for years, hit a historic high of Sh12.80 per share.
“The way things have started, I think 2014 will be a better year for Kenya. The risk for investment is lower,” said Mr Jonathan Stichbury, the managing director and chief executive at PineBridge Investments (EA) Ltd.
The risks
However, the risks to the rosy outlook include continued weak growth in developed economies that will impact negatively on Kenya’s export and tourism activities, and geopolitical uncertainties in the international oil market, which could slow down the manufacturing sector.
Others are public expenditure pressures, especially recurrent expenditure — and in particular wage and interest payments — and challenges related to the implementation of the devolved system of governance.
The ceiling for development expenditure, including donor-funded projects, for the 2014/15 financial year, is expected to increase to Sh443.3 billion (9.6 per cent of gross domestic product).
Expenditure execution lagged behind in the first six months of the 2013/2014 financial year on account of lower absorption of funds from external sources.
Total expenditure (based on disbursement) amounted to Sh572.2 billion against a target of Sh685 billion — reflecting underspending of Sh112.8 billion.
The underspending comprised Sh30.6 billion in lower-than-targeted disbursements to the counties, while Sh105 billion was in respect to low development expenditure and net lending.
Domestically financed development expenditure was also below target by Sh13.7 billion, and those financed using foreign resources were below target by Sh90.3billion.
“We expect domestically funded development to pick up. The county disbursements will be as scheduled in the revised county disbursement schedule. Recurrent expenditures is also expected to be on course,” said Mr Nyamunga.
By James Anyanzwa, The Standard
