Kenya Signals Slightly Lower Growth Outlook on Election RematchBy
Central bank’s Njoroge says growth could be ‘south of 5.5%’
Governor praises Fed normalization guidance for smooth markets
Kenya’s central bank may slightly lower its 2017 economic growth forecast to reflect uncertainty from this month’s unexpected presidential election do-over, said Governor Patrick Njoroge.
“The growth rate won’t be as strong as we expected, but I don’t think we can say that we’ve gone over the precipice,” Njoroge said in an interview in Washington on Saturday, where he was attending annual meetings of the International Monetary Fund and World Bank.
The most recent economic data suggest the growth rate could be “south of 5.5 percent, but definitely above 5 percent” and it “has not gone over the cliff,” said Njoroge, a former IMF adviser.
An earlier GDP growth calculation had incorporated the effects of a drought, which has hurt Kenya’s coffee and tea production, slower credit growth, and interest-rate caps on commercial banks, said Njoroge. As the bank re-assesses its outlook, it will examine the effects of delayed business investment and government spending on big projects since the Supreme Court on Sept. 1 annulled the election outcome.
“There are concerns by the private sector, but I think a lot of it is overblown,” he said.
Kenya was thrown into political turmoil when the country’s highest court annulled the August presidential-election results, which had handed Uhuru Kenyatta a second term. The court cited widespread illegalities and irregularities, and ordered a new vote within 60 days.
Kenyatta’s rival, Raila Odinga, a four-time presidential opponent, has said he’ll not participate in the new vote planned for Oct. 26 because of the electoral agency’s refusal to reform. The opposition plans daily protests starting Monday. The country’s Independent Electoral and Boundaries Commission has said it will go ahead with the rerun with all candidates on the ballot, while the opposition has cast doubt it will happen.
All of that uncertainty has prompted Kenyan stocks to fall the most in Africa since the Sept. 1 annulment, and yields on Kenya’s Eurobonds have jumped.
On the international front, Njoroge praised the U.S. Federal Reserve for smoothly telegraphing its policy normalization process, which he said sets an example for the world’s central banks.
“At the beginning we were very worried about the withdrawal of the stimulus, of normalization,” he said. “I think the U.S., as the leading central bank in the world, has done a phenomenal job in terms of communicating its policies ahead of time, of forward guidance. If the others do the same, I think that we’ll do OK.”
Njoroge said he’s also closely watching the U.K.’s Brexit process and said Kenya will fight to keep its preferential market access and investment flows from Britain, its former colonial power.