Global Credit Rating agency Moody’s sees Kenya growing by five per cent in 2021 on account of a dynamic economy.
The slightly higher than World Bank projection pins the outlook on lack of energy commodity exports but warns that tourism sector will face a slow recovery.
According to Moody’s, non-energy commodity exporters in East Africa and West Africa will remain the most dynamic economies, with growth driven by domestic demand and high public investment rates.
“On the other hand, tourism-dependent economies will recover slowly, with lower than historical growth forecast for Kenya, Tanzania and Namibia,” the report notes.
The agency had in its earlier review said Kenya will struggle repaying debt this year.
This week, Kenya said it had sought debt relief from the Paris Club, and is seeking a debt holiday with other lenders.
However, analyst George Bodo calls the projections outsized. “We can see banks, parastatals and counties struggling with debt, those projections are not in touch with the reality,” he said.
It what is seems to be a pandora’s box, World Bank’s latest forecast says Kenya’s economy is set to grow faster than any country on the continent this year and at one of the fastest rates in the World.
Despite the favourable growth outlook by Moody’s notes that public debt for most of sub-saharan Africa will remain elevated with state owned enterprises posing more debt concerns.
“We do not expect debt burdens to come down in the foreseeable future as revenue generation capacity remains weak.
Higher debt loads, lower government revenue, and higher interest costs will increasingly challenge debt affordability.
Contingent liabilities from state-owned enterprises also pose an additional risk,” the report notes.
Moody’s says Kenya’s revenue will remain sub-par but the governments move to restore previous tax rates on corporate and personal income taxes will prevent a further decline in Kenya’s revenue/GDP ratio,
“The narrowing revenue base has, in turn, madefiscal consolidation more difficult.
An IMF program, if secured, would support fiscal consolidation efforts and provide important liquidity relief given the government’s large gross financing needs, which will re
- Moody’s expects Kenya’s debt burden to reach close to 70 per cent of GDP by June 2021.
- The rating agency’s projection shows Rwanda leading in recovery in East Africa, then Kenya followed by Tanzania.