NAIROBI, Economists at Barclays Bank Kenya are projecting a 5.5 per cent economic growth for the country this year, up from the 5.0 per cent last year, driven by among others a rebound in tourism activities, improved agricultural yield and political stability.
The slowed private sector credit growth of 2.0 per cent currently as a result of a cap on interest rates has, however, been cited as a drawback towards the much needed economic growth, says the local subsidiary of Britain’s Barclays Bank.
The ongoing surge in fuel prices has also been projected to have a significant impact on the country’s inflation.
The bank said one out of every three shillings which Kenyans paid in the form of taxes last year was used to pay interest for the country’s debts. And with the country’s debt sustainability widening by the day, economists at Barclays Bank note that there is need for the country to increase investments in the private sector to close this debt gap.
Achieving this, according to the economists, is, however, being derailed by the cap on interest rates which has resulted in a slowdown in private sector credit growth to the current low of 2.0 per cent.
The coming into force of the new international financial report standards for banks this year in the face of the interest rate caps may lead to a further decline in private sector credit growth. However, the cutting of costs by banks through adoption of technology may help lenders offer credit at lower rates.
Though Kenya’s inflation is largely food-driven, the current high fuel prices which are at the highest level since mid-2014 are expected to pile inflationary pressures on the economy.
Despite these issues, economists at Barclays bank are projecting a 5.5 per cent economic growth for the country this year from the 5.0 per cent recorded last year. They also believe the shilling could also weaken to a low of 106 to the US dollar this year.
Source: NAM NEWS NETWORK