Agriculture and Kenya's economic growth 2012

Kenya’s growth projections     by Mwangi Mumero

Surging information and telecommunication sector would spur Kenya’s economic growth this year, even with the imminent challenges of elections and establishment of a new system of governance, the World Bank says.

This comes in the wake of reduced economic growth of 5.3 percent of Gross Domestic Product (GDP) in 2012 down from the 5.7 percent projected last year.

"The continued economic crisis in the European Union and the U. S. which are significant markets for Kenya's exports will slow down economic growth in Kenya," observed Justus Nyamunga, Director of Economic Affairs in the Ministry of Finance,  during the launch of the public sector hearing of the 2012/13 Medium Term Expenditure Framework.

According to data from the ministry of finance, over the last nine months of the 2011, the Kenyan economy grew by 4.2 percent down from 4.9 percent in the similar period in 2010.

"This lower projection is not unique to Kenya as many countries including fast growing economies in the East African region including Rwanda and Tanzania have done the same," the ministry official said.

Following the launch of the latest Kenya Economic update, a WB report says that despite facing the challenges in 2012, growth in information and telecommunications could boost the performance of a number of sectors, including transportation, agriculture and infrastructure.

“Africa is on a growth path, but Kenya, particularly, has two advantages. Human resource and great location”, Wolfgang Fengler, the World Bank’s lead economist for the East African region said.

On its part, the International Monetary Fund has said that it expects the Kenyan economy to grow 5.3 percent in the 2011/12 fiscal year before accelerating to expand 5.8 percent in 2012/13.

Kenya's budget review and outlook paper for 2012/13 financial year is projecting total revenue of $ 10.6 billion against expenditures of $ 13.19 billion.

"Treasury hopes to fund part of the deficit by borrowing a total $ 2 billion, about 4.6 percent of the GDP with external funding accounting for $ 1.15 billion," Nyamunga added.

With the rising inflation, reduced trade with European partners and the ongoing war with  Al-Shabaab fighters in Somalia,  Kenya’s economy is headed for a bumpy year, according to analysts though past resilience is expected to weather the storm.

The roll-out of new administrative structure brought about by new Constitution is also expected to put pressure on financial demands this year.

 Increased salary demands from public servants and the need to service increased external debt are some of the issues the government has also to grapple with.

 

Officials in the Finance Ministry report that high inflation and a volatile exchange rate slowed down domestic borrowing from the projected one billion dollars by the December 2011 as the government only managed to collect $ 161 million locally.

Kenya is looking to borrow $ 119.5 billion in total domestically in 2011/12.

Already, the Kenya Revenue Authority has decried the 17 per cent drop in revenue collected by December 2011.

The treasury is optimistic that the economy will remain resilient with most expansion coming from growth in agriculture, tourism and exports especially in the East African region.

The Treasury expects to seal a deal for a $600 million short-term external loan early in the year to help plug its budget deficit this fiscal year after it shelved plans to issue a Eurobond. (ends)