Kenya delays 2014 growth forecast after 2013 disappoints

President Kenyatta

Kenya has delayed the release of its official economic growth forecast for this year by more than a month after saying on Tuesday that the economy grew less in 2013 than expected.
East Africa's largest economy grew by 4.7 percent last year, a slight acceleration from 2012's 4.6 percent figure but less than the government's projection of just above 5 percent after low rainfall curbed production in the key agricultural sector.
The government had been expected to give its forecast for 2014 growth on Tuesday but Cabinet Secretary for Planning Anne Waiguru told reporters the release had been delayed.
"We will have it (2014 forecast) in the budget strategy paper, the one that is going to precede the national budget, she said. "We need to make a few consultations with the national Treasury before we give the forecast."
The finance minister is scheduled to present the national budget to parliament in mid-June. The Treasury said in January it expected the economy to grow by 5.8 percent this year.
Analysts said deferring the growth estimate would buy the authorities time to assess the effects of a drop last year in tea prices and sluggish tourist arrivals.
Gun and grenade attacks blamed on al Shabaab rebels in neighbouring Somalia, including September's attack on the Westgate shopping mall in Nairobi, in which at least 67 people were killed, may also have an economic impact.
"There are several factors that were negative last year and they are up in the air," said Robert Shaw, a Nairobi-based economic analyst.
"It was quite wise not to make a projection at this stage because we certainly need a little more time to see how those factors continue."
Waiguru said the disappointing 2013 performance was driven by slower growth in the agricultural sector, which accounts for a quarter of the economy, due to inadequate rainfall in some parts of Kenya.
The sector grew 2.9 percent in 2013 compared with revised growth of 4.2 percent in the year before, with output of coffee and maize dropping 20 percent and 2 percent respectively.
The minister also said high lending rates for businesses and households had dragged on overall economic performance in 2013.
Razia Khan, head of research for Africa at Standard Chartered, said slower spending by the government after an election in March could have also weighed on growth last year.
"This will be a key factor in Kenya registering a positive surprise when its budget numbers are published," Khan said.
"Slower-than-expected spending will see the fiscal deficit narrow, relative to initial projections of -7.9 percent of GDP."
Total exports declined 3 percent from the previous year, causing the trade balance to worsen, Waiguru said.
Kenya's balance of payments surplus declined to 74 billion shillings ($852.04 million) from 123 billion shillings in 2012.
Waiguru said the economy had been stable in the first quarter of 2014, however, a trend that was likely to be maintained for the rest of the year.
Commercial lending rates have been falling in an orderly manner in recent months while inflation and the exchange rates have been broadly stable.
"If there is one area that this government can be complimented on, it is the relatively stable - one could almost say solid - macroeconomic framework," Shaw said.
"It is quite a nice change from before where all sorts of factors kicked in and it was all very turbulent."