National Treasury has cut Kenya’s GDP growth forecast for this year to 6.0 percent from previously projected 6.2 percent, according to it’s Draft 2019 Budget Review and Outlook Paper released Thursday.
“This reflects the strong growth of 6.3 percent in 2018. The 6.0 percent growth outlook will be supported by the stable macroeconomic environment, investments in the strategic areas under the “Big Four” Plan and regain in business and consumer confidence following political stability in the country.”
The economic outlook takes into account the subdued performance in the agriculture and manufacturing sectors following the unfavorable weather conditions experienced in the first quarter of 2019 and depressed credit to the private sector.
Treasury expects growth to rise over the medium term supported by improved production in agriculture, expected growth in tourism, resilient exports, and benefits from ongoing regional integration efforts. In addition, strong consumer demand and private sector investment.
However, the risks to the outlook include an escalation of global trade-related tensions, a rise in oil prices and weather-related shocks which Treasury says “Should these risks persist, Kenya’s growth forecast could be constrained.”
Furthermore, Kenya’s fiscal deficit for the FY 2019/20 is projected to decline to 5.9 percent of GDP from the 7.6 percent in FY 2018/19, reflecting efforts to regain fiscal consolidation through expenditure rationalization measures.
According to the budget review document, continued reforms in tax legislation and administration, revenue collection “Will create the necessary fiscal space for the implementation of the “Big Four” Plan. These efforts will also be supported by the rationalization of the budgets of the State corporations expected to yield resources close to 0.5 percent of GDP.”
“Fiscal policy over the medium-term aims at enhancing revenue mobilisation and furthering the fiscal consolidation plan to reduce budget deficit and strengthen our debt sustainability position while supporting economic growth.”