A peaceful settlement of Kenya’s political impasse will determine the country’s economic fortunes in the near and medium terms, the World Bank said on Thursday.
The bank announced this as it downgraded its 2017 growth forecast to below five percent.
Severe drought in the first half of the year, a slowdown in credit growth arising from last year’s capping of the lending rate and a prolonged political season had taken steam off economic activity forcing it to lower the growth forecast to 4.9 per cent from an earlier estimate of 5.5 per cent, the bank said in its latest quarterly review.
The multi-lateral lender, however, said it expects East Africa’s largest economy to rebound to a growth rate of 5.5 per cent next year before accelerating to 5.9 per cent in 2019 but subject to the settlement of the political impasse in the coming weeks.
“Our baseline assumes political uncertainty will dissipate in the medium term, and with that, the wait and see attitude adopted by both businesses and consumers will wane,” the World Bank says in its quarterly update report.
“If political uncertainty lingers beyond the near term, its dampening effect will persist into 2018 and 2019, leading to a weaker than projected growth performance,” the report says.
There are concerns that the dark political clouds that have hung over the country since the beginning of the year have yet to clear as opposition leader Raila Odinga, who boycotted the repeat October 26 election prepares to swear himself in on Jamhuri Day – setting up his supporters for a possible clash with the government of President Uhuru Kenyatta.
Mr Odinga and his supporters have vowed never to recognise the presidency of Mr Kenyatta who was sworn in on November 28 after he won 98 per cent of the votes in the repeat election.