Kenya's economy should recover slightly in 2009 after growth slumped to 1.7 percent last year due to post-election violence, poor weather and global commodity price shocks, the government said on Thursday. Planning and National Development Minister Wycliffe Oparanya said the economy should expand by 2-3 percent assuming tourism and agriculture recover, infrastructure spending bears fruit and investor confidence in the coalition government is restored.
"We expect some recovery, but not a lot," he said. The government prediction was in line with a Reuters poll published earlier in May. Analysts forecast, on average, 2.5 percent growth for 2009, a downgrade from an earlier prediction of 4.1 percent. In 2008, east Africa's biggest economy grew 1.7 percent 2008, down from 7.1 percent a year earlier.
"We have not done very well," Oparanya told a news conference. "This is the lowest growth rate since 2003." Growth almost ground to a halt in the first quarter of 2008 due to a post-election crisis. Ethnic fighting killed more than 1,300 people and battered key economic sectors such as agriculture, tourism and transport.
He said the government hopes good rains will improve agricultural production this year, which accounts for about a quarter of the $35 billion GDP in east Africa's biggest economy. Oparanya also said persistent political wrangling by leaders of the country's coalition government since it was formed in April 2008 after the violence had hurt growth.
"We've not been lucky, politics have continued since the formation of the coalition government," he said. "Continued political bickering has affected our economy to some extent. In a survey published last month, east African business leaders cited political instability in Kenya as a bigger threat to the economic outlook than the global financial crisis.
"We need to deal with the political governance so we restore investors' confidence," he said, noting that foreign direct investment inflows fell in 2008. Oparanya said only two sectors posted higher growth rates in 2008. Construction grew by 8.3 percent, up from 6.9 percent in 2007, while education grew by 5.8 percent, up from 3.7 percent.
Growth rates in the wholesale and retail, manufacturing, transport and communications and financial sectors all slowed. Two sectors of the economy contracted in 2008. The hotels and restaurants sector was badly hit by the violence. After growing 16.3 percent in 2007, the sector contracted 36.1 percent in 2008. Agriculture and forestry went from 2.0 percent growth in 2007 to a fall of 5.1 percent last year.
Annual overall inflation almost tripled to 26.2 percent in 2008 from 9.8 percent in 2007 and underlying inflation rose to 11.1 percent from 5.7 percent in the previous year. "This is the highest since ... 1994 when it reached 28.8 percent," he said.
Oparanya said total government debt stood at 748.5 billion shilling ($9.64 billion) and government expenditure for the fiscal year ending in June 2009 is expected to total 773 billion shillings from 658.1 billion in the previous year. Revenues on the other hand are seen hitting 549.6 billion shillings from 468.6 billion in the year that ended June 2008.
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