The World Bank has cut its 2017 growth estimate for Kenya’s economy to 4.9 per cent, which would be the slowest annual expansion in five years.
It said on Thursday that this was due to drought, sluggish credit growth and a prolonged election season.
The lender had already cut its initial forecast by half a percentage point in April, to 5.5 per cent, citing the severe drought in the first half and the drop in private sector growth.
The Kenyan economy has since been buffeted by political risks after the Supreme Court nullified an August 8 election and ordered a re-run that was boycotted by NASA.
“Private sector activity weakened over the first three quarters of 2017 on account of the election induced wait-and-see attitude,” the World Bank said in its report on the economy.
The drought drove up inflation and cut consumer demand. The main Purchasing Managers’ index for manufacturing and services plunged to a new low in October due to the political uncertainty.
President Uhuru Kenyatta was sworn-in for a second five-year term but main Opposition leader Raila Odinga has said he will hold a parallel “swearing-in” ceremony next week.
Growth is expected to rebound to 5.5 per cent in 2018 and 5.9 per cent in 2019, the World Bank said, provided the government implements policy remedies like the removal of a cap on commercial lending rates.