Kenya trims 2015 growth view again, cites El Nino

By: 
Reuters
Henry Rotich

Kenya's finance minister Henry Rotich

Kenya's finance minister further trimmed the country's 2015 economic growth forecast on Wednesday, citing tighter monetary policy and the potential impact of the El Nino weather phenomenon that has brought heavy rains.

Henry Rotich said growth would be in the range of 5.8 to 6.0 percent. The government already downgraded its forecast to 6 percent in October from the 6.5 to 7 percent it originally predicted.

While still on track to outpace the 5.3 percent growth it recorded in 2014, Kenya's economy has this year been buffeted by international and domestic factors. A strong dollar and worries about a hefty current account deficit have weighed on the shilling, prompting the central bank to hike interest rates.

Foreign exchange inflows into Kenya have suffered because of a series of attacks by Islamist militants in the past two years that have hammered the tourism industry.

"Our economy is still reeling from the negative impacts of global economic crisis, travel advisories which have severely affected the tourism sector, weather vagaries, terrorism threats and increased pressures on expenditures," the minister told a briefing to outline plans for the year to June 2017 budget.

Rotich said the government was reviewing spending in the current 2015/16 budget, and that government borrowing over that period could be lower than expected.

He did not give figures but said some foreign trips by government officials would not be funded.

The budget deficit for 2015/16 has been forecast at 8.7 percent of gross domestic product, higher than 2014/15 and a level that has worried economists who say Kenya should be reducing the gap as the economy recovers from a sluggish phase.

Rotich said the spending review for 2015/16 would be presented to lawmakers but did not say when. "The measures will be reflected in the supplementary budget to be taken to parliament soon," he told the briefing.

Geoffrey Mwau, the economic secretary at the finance ministry, said the government was unlikely to tap international capital markets this fiscal year after it took out a syndicated loan for up to $750 million.

"We are looking at perhaps going in the next fiscal year," he told Reuters on the sidelines of the briefing, adding the choice of the instrument they will use will depend on market conditions.

El Nino is expected to hit an economy that still relies heavily on agriculture. Kenyan media has already reported flooding due to heavy rains as a result of the weather phenomenon, washing away roads and cutting off some rural areas.

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