GDP Growth Projections Rank Kenya Behind Its East African Partners
According to the latest forecast by the African Development Bank (AfDB), Kenya’s GDP growth in 2022 will trail that of other East African countries, except Burundi and Tanzania. This is partly due to the rising inflation in Kenya.
An annual economic outlook report released by the Bank shows a decline in Kenya’s GDP growth from 5.9% in 2022 to 5.9% in 2023, ranking fifth in the seven-member regional bloc.
Rwanda is expected to retain its place as the fastest-growing economy in East Africa in 2023, with a GDP growth of 7.9%. Democratic Republic of Congo (DRC) and South Sudan will tie at 6.5%, followed by Uganda at 6.2%, Kenya at 5.7%, Tanzania at 5.6%, and Burundi at 4.6%.
Inflationary Pressures Faulted for The Decline In GDP Growth
The Bank said Kenya’s GDP growth has been affected by the inflationary pressure and the upcoming August 2022 General Elections.
In an annual general meeting in Accra, Ghana, the Bank said Kenya’s growth is projected to slow down (5.9% last year and 5.5% next year). This is mainly due to a decline in both demand and supply. On the demand side, the decline in domestic and external demand is caused by lower-income, rising food prices, and high fuel import costs. On the supply side, cost-push inflation is expected to cause tepid economic activities in the different sectors.
The increase in the cost of essential commodities came at a time when workers’ income is yet to recover from the aftermath of COVID-19, forcing many households, especially those in the low-income segment, to cut their expenditures.
Inflation in Kenya is projected to reach 7%, edging towards the target band of 7.5%. The Bank said this results from greater energy and a jump in prices for essential items like soap, cooking gas, and cooking oil.
According to the Kenya National Bureau of Statics director McDonald Obudho, the food prices in April 2022 were higher than the prices of food in the same month last year.
Fiscal deficit to reduce
On the other hand, the Bank said Kenya’s fiscal deficit, which essentially refers to the government’s proposed revenues and spending for a fiscal year, is expected to reduce to 6.5% of the GDP this year and 5.5% in 2023 when the IMF-supported fiscal-consolidation and debt management program resumes.
In 2021, Kenya posted an impressive 7.5% growth in GDP, according to data from the Kenya National Bureau of Statistics. The data showed about 926,000 new jobs were created in the year, contributing to the country’s economic growth.
In 2020, Kenya had overtaken Angola as the third-largest economy in sub-Sahara Africa; however, the effects of Covid-19 and Russia’s invasion of Ukraine have had a huge effect on the overall outlook of the economy.
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