Britam projects economy to grow by 5.6pc fueled by Govt spending

February 2, 2017
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The government has stated that it expects to grow infrastructure spend by about 16.4 percent/CFM NEWS

, NAIROBI, Kenya, Feb 2 – Kenya’s economy is projected to grow by 5.6 percent with growth being largely driven by the government’s expenditure.

Britam Asset Managers’ CEO Kenneth Kaniu says the country’s GDP growth will be spurred by the continued spending in infrastructure.

“The government has stated that it expects to grow infrastructure spend by about 16.4 percent. This will definitely spur the economy’s growth in the absence of the very low consumption growth and growth in the private sector credit which is below 5 percent,” he said.

Ordinary Kenyans are nevertheless unlikely to tangibly feel the effects of the growth as inflation risks rising further due to the drought.

“Food prices account for 36 percent of the inflation basket, and we are expecting this to rise,” he said.

Kaniu’s sentiments are somewhat similar to those of the Monetary Policy Committee which predicts an elevation on food and electricity prices in the near term.he MPC noted that there are increased uncertainties with regard to the prevailing drought conditions and risks in the global markets.

The MPC noted that there are increased uncertainties with regard to the prevailing drought conditions and risks in the global markets, though the CBK projects a 5.7 pc economic growth in 2017.

Kaniu adds that the extra election campaign monies that will be circulating in the economy this year will further fuel inflation.

“If the currency also weakens, then there will be imported inflation because you are importing goods and services, the currency is weaker so you need to pay more for them.”

Kaniu adds that inflation may easily tip the upper range of 7.5 percent for this year.

On a positive note, the shilling continues to be fairly stable – only weakening by 2 percent- especially relative to other African currencies.

Kenya’s diverse exports have also played a key role as they have managed to make the economy resilient. That’s not all, investments made into infrastructure namely roads, rails, ports and airports has led to positive increase in GDP growth from a government’s spending point of view.

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