Commerce

Budget office slashes growth rate to 4.9 pc

Tuesday, May 17th, 2022 10:00 | By
Parliament Buildings. Parliamentary budget office has revised economic growth this year from 6 per cent to 4.9 per cent on local uncertainties. FILE

The parliamentary budget office (PBO) has revised Kenya’s economic growth this year from 6 per cent to 4.9 per cent on local uncertainties like elections and inflation and global shocks in Europe.

In a document that unpacked revenue estimates and expenditure for the 2022/2023 financial year and the medium-term expenditure, the budget office warned that economic performance will be lower than expected.

The review is based on erratic weather expected to adversely affect agricultural production, increasing fuel and food prices that will lower purchasing power for the middle to low-income households and reduce private consumption and the August 9 General Election that will lead to a slowdown in private investment.

The budget office also cited supply chain disruptions owing to the ongoing Russia-Ukraine war that will reduce Kenya’s export and tourism earnings.

“Taking all these factors into account, it is projected that the economy will grow by 4.9 per cent in 2022,” the PBO report concludes. Weather conditions While reading a budget statement in June, National Treasury Cabinet Secretary Ukur Yatani projected the economy to grow by 6 per cent, supported by stable macroeconomic environment, favourable weather conditions to help agricultural output and drive food processing and the continued recovery in industry and services.

The country is currently experiencing a fourth consecutive patchy rainy season aggravated by drought conditions and food insecurity across the country, with an estimated 3.1 million people in pastoral and marginal agricultural areas affected.

“The late-onset and poor distribution of the March-May long rains season are expected to result in below-average crop production, especially in the marginal agricultural areas, thereby worsening the food security situation,” notes PBO.

It has been released at a time Kenyans have expressed concern about the rising cost of living with food prices increasing exponentially since the turn of the year and are currently estimated at 9.92 per cent, up from 8.89 per cent in January 2022.

The seasonal weather changes have resulted in low food and forage production and an increase in prices of a variety of vegetables and milk, in addition to a rise in the prices of cooking oil and wheat flour due to higher import prices because of reduced international supply of palm oil, edible oil from South-East Asia and wheat from Russia and Ukraine.

This has made the food basket more expensive with increased retail prices of vegetables, milk, bread and cooking oil. Budget office Economist Ken Gichinga, Chief Economist at Mentoria Economics, agreed with sentiments from the budget office.

“The price of commodities such as bread fertiliser and global fuel prices have gone up and those continue to present significant risks in terms of the cost of living. The impact in the short term is that inflation continues to rise. When you have inflation in energy prices, food prices the cost of living for the ordinary Kenyans goes markedly up,” said Gichinga.

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