Kenya stares at bleak outlook next year after election fiasco

Bloomberg

Kenya is facing an economic storm in 2018 in the aftermath of two disputed elections. Saddled with the triple threat of austerity measures to pay for those votes, slowing credit growth and new accounting rules
for banks, Kenya now risks missing the
government’s forecast for 6 percent economic growth next year, according to lenders including Nairobi-based Stanbic Bank Kenya Ltd. Investec Bank Ltd. strategist Chris Becker says expansion could
slow to as little as 1 percent.
“With growing headwinds, there is no longer any room for complacency,” said Ronak Gopaldas, an independent analyst, formerly at FirstRand Ltd.’s investment banking unit in Johannesburg. The new administration should “refocus its attention to the economy, which has been on the back-burner for the better part of the year,” he said. The country’s Treasury has already cut this year’s growth target to 5 percent from 5.9 percent as the protracted election furor damped investment and a drought curbed farm output.
Now key indicators for East Africa’s largest economy, the regional hub for multinationals including IBM Corp. and Toyota Motor Corp., are flashing warnings signs, with the latest Purchasing Managers’ Index, a measure of private-sector activity, falling to a record low and bank loans growing the slowest in more than a decade.
After a court annulled an Aug. 8 election, Kenya held a rerun of the vote on Oct. 26, that was boycotted by the main opposition coalition. President Uhuru Kenyatta’s Jubilee Party also won the second ballot, which is now being challenged in the Supreme Court.
The nation’s 2.6 trillion-shilling ($25.1 billion) budget was amended to include “austerity measures” for the current fiscal year to accommodate unplanned expenditures such as the rerun of the election, Treasury Secretary Henry Rotich said in September.
The Treasury has revised its 2017-18 budget deficit forecast to 8.5 percent of gross domestic product from 6.8 percent. The government recorded a 9.2 percent shortfall in year through June 2017.
Any reduction in government spending is likely to stunt growth, unless alternative sources of investment are found, said David Willacy, a foreign-exchange trader at London-based INTL FCStone Ltd. in London.