Fitch revises Kenya outlook to negative on general election hiccups
Market News
Fitch revises Kenya outlook to negative on general election hiccups
Monday 04 April 2022
Vice President William Ruto addressing residents of Chavakali in Vihiga County on January 6, 2022. PHOTO | ISAAC WALE | NMG
Summary
- The agency said a deadly presidential poll poses the biggest threat to Kenya’s economic recovery since the Covid-19 shocks last year.
- Fitch affirmed Kenya’s rating at B+, signifying higher relative risk, with an above-average probability of default.
- Kenya’s economy has a history of slowing down during election years when businesses suspend investment decisions, pending a return to normal.
Global ratings agency, Fitch, lowered its outlook on Kenya’s sovereign debt from “negative” to “stable”, citing an expected slowdown in Kenya’s GDP growth this year due to election jitters on 9 August and continued budgetary pressures.
The agency said a deadly presidential poll poses the biggest threat to Kenya’s economic recovery since the Covid-19 shocks last year.
“The negative outlook reflects uncertainty regarding planned fiscal consolidation and risks to economic growth around the August 2022 general election,” Fitch said in a statement.
“Furthermore, soaring global commodity prices are putting upward pressure on inflation and the current account deficit.”
Fitch affirmed Kenya’s rating at B+, signifying higher relative risk, with an above-average probability of default.
The ratings firm expects economic activity to grow by 6% this year, with service sectors continuing their post-pandemic recovery and agriculture recovering from negative growth in 2021 due to adverse weather conditions.
“We expect growth to slow to 6% as the August 2022 general election poses downside risks to growth in the second and third quarters of 2022,” the agency said.
“Our baseline scenario calls for a moderate level of disruption in line with the 2017 elections, but well below the violence experienced in 2007 and 2012.”
Kenya’s economy has a history of slowing down during election years when businesses suspend investment decisions, pending a return to normal.
Economic growth slowed to 4.81% in 2017 following the hard-fought presidential poll, from 5.88% a year earlier. The murderous presidential election of 2007 caused the economy to fall to a growth of 0.23% against 6.8% the previous year.
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