Kenya cuts 2017 growth outlook on slowing credit growth

Workers prepare preserved flowers and foliage at the Vermont Flowers export processing zone (EPZ) factory in Kenya's capital Nairobi, file. REUTERS/Thomas Mukoya
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NAIROBI (Reuters) – Kenya’s economy is likely to expand by just over 6 percent next year, down from an initial forecast of 6.5 percent, mainly because of slowing private-sector credit growth, a senior Treasury official said on Wednesday.

Private-sector credit grew just 7.1 percent in July from 17.8 percent in December of last year, the central bank said in September. That is well below what the central bank says is ideal credit growth of 12 to 15 percent.

The contraction in July was before a cap on commercial lending rates imposed by the government in September, a move that is expected to further shrink credit levels.

“We have moderated our growth (forecast) in 2017 to slightly over 6 percent. Before we were very optimistic it would get to 6.5 percent,” Geoffrey Mwau, the director general of fiscal and economic affairs, told Reuters.

“We don’t see credit growth affecting growth especially for 2016,” he said.

Most of the economic growth momentum was driven by public- sector investment, he said.

The East African nation is building a new multi-billion- dollar railway line from the coast, expanding its road network and constructing new power plants and dams.

“Public investment is not really related to credit,” Mwau said, adding growth was also supported by farming, a recovery in tourism and investments in oil and gas after Kenya discovered oil in 2012. Commercial oil production has yet to start.

(Reporting by Duncan Miriri; Editing by Edmund Blair, Larry King)

 

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