National Assembly warns over risks to the projected economic growth

Report by the Parliamentary Budget Office (PBO) has expressed worries that while the National Treasury anticipates moderate growth in Kenya’s economy over the medium term of 5. 2 percent in 2024 and 5. 4 percent in 2025, this growth will mainly stem from recovery in the agriculture sector and the ongoing resilience of the service sector.

The country’s anticipated economic growth may not materialize due to uncertainties in both global and domestic markets, a new report indicates.

The report states that the growth in the agriculture sector relies on expected above-average rainfall in most regions of the country in 2024 and the ongoing implementation of the Bottom-up Economic Transformation Agenda (BETA) value chains. Conversely, the estimated growth in the services sector is supported by ICT reforms, enhancing growth in financial services, healthcare, and public administration.

“However, the country’s fiscal outlook for FY 2024/25 displays both ambition and caution. Following the loss of the Finance Bill 2024 and the implementation of a fiscal consolidation plan, the government aims to improve revenue collection, optimize expenditure, and manage increasing debt obligations,” the report notes, highlighting that rising geopolitical tensions resulting from various regional conflicts could impact global supply chains, negatively affecting the current account deficit and hindering potential growth.

It also raises concerns that current fiscal consolidation efforts might limit economic growth, especially if government initiatives to advance Public Private Partnerships (PPPs) and revenue enhancement strategies are delayed or hampered, while adverse weather events, such as expected La Niña occurrences, could detrimentally impact agricultural production.