Kenya projects 7% economic growth by 2017

Kenya expects its economic growth to hit 7 percent by 2017, according to the National Treasury. The institution notes that the East African nation's economy will grow steadily in the next three years before crossing the 7 percent mark in 2017. "In terms of fiscal years, economic growth projections translate to 5.9 percent in 2013/2014, 6.3 percent in 2014/2015, 6.6 percent in 2015/2016 and 6.9 percent in 2016/2017," says the Treasury in its Budget Review and Outlook Paper for the first quarter of this financial year received Friday. Some of the things within the country that will contribute to the growth include improved weather conditions, low inflation and stable exchange rates. "Growth will be augmented by increased production in agriculture following receipt of adequate rain, completion of key infrastructure projects (such as roads and energy), and other initiatives geared towards exports promotion including expansion of regional markets, special export zones and commodity exchanges, " says the document. Treasury expects domestic demand to become robust following increased investor confidence after successful elections. "The government is committed to pursuing a managed float exchange rate regime with interventions limited to smooth out erratic factors in the interbank market for foreign exchange. Stability in the movement of the exchange rate will support the low inflation forecasts," says the Treasury. Other internal risks to the East African nation's growth prospects include rising public wage bill resulting from Constitution implementation process that has seen the number of elected leaders double. "Public expenditure pressures, especially recurrent expenses, pose a fiscal risk. Wage pressures and implementation of the Constitution and the devolved government may limit continued funding for development expenditure thus stifling growth," it says. In the first quarter, Kenya's economy expanded by 5.2 percent compared to 4 percent in a similar quarter in 2012. Between April and June, the East African nation's economy grew by 4.3 percent compared to a growth of 4.4 percent in the same quarter in 2012. Overall growth for this year is expected to be 5. 6 percent. "The growth in second quarter was mainly supported by strong expansions of activities in electricity and water, financial intermediation, agriculture and forestry and manufacturing sectors, " the Treasury says. Hotels and restaurants and wholesale and retail trade sectors, however, registered contraction in growth due to suppressed investments during the electioneering period. Treasury analysts observe that externally, some of the things that may stifle Kenya's projected economic growth include high oil prices and volatility in the euro zone. "The risk to the outlook for 2014 and beyond includes continued weak growth in advanced economies that will impact negatively on our exports and tourism activities," according to the document. "Geopolitical uncertainty in the international oil market will also slowdown the manufacturing sector. There are risks with fuel costs remaining high as world oil prices persistently rise due to political instabilities in oil rich countries." According to the analysis, Kenya's high current account deficit resulting from trade imbalance also poses risks to the country's macro-economic stability. "Kenya's large and persistent current account deficit of over 10 percent of Gross Domestic Product in the last three years raises a major concern for sustained economic growth. The short term flows which Kenya relies on to finance the deficit could become volatile, triggering a disorderly adjustment," it reports. The report notes the current account deficit is bound to stay high, driven by high capital imports and high investment demand. "In addition, the weak and subdued demand for Kenya's exports in its traditional European markets will remain a dragon on Kenya's current account, as the Euro Zone battles recession," notes Treasury. Kenya's trade deficit worsened in the third quarter of this year following steep growth in imports. The nation's trade deficit went down by 485 million U.S. dollars, from a surplus of 997 million dollars during a similar period in 2012. During the period, Kenya imported goods worth 16.7 billion dollars against exports that totalled a paltry 6.1 billion dollars. "The International Monetary Fund (IMF) revised the global economic projections in July, indicating a less optimistic outlook. While we expect the economy to remain resilient, our projections remain cautious," says the report. The IMF projects the world and sub-Saharan Africa economies to grow at 3.3 percent and 5.4 percent this year and 4 percent and 5. 7 percent in 2014, respectively.