Kenya may not realize Vision 2030 goals if the current slow economic growth in the country persists, experts have warned.
The second quarter capital market soundness report by Capital Market Authority released yesterday showed that the country's economic growth is way below the 10 per cent threshold needed annually from 2012 to meet the Vision 2030 economic dream.
The country has never hit the 10 per cent GDP margin in the past five years, posting an average GDP of 5.34 from 2012 to 2016.
In the first quarter of this year, the country posted 4.7 per cent growth down from 5.9 per cent recorded same period last year. The highest GDP growth ever was recorded in the fourth quarter of 2010.
The Kenya Vision 2030 is the national long-term development policy that aims to transform Kenya into a newly industrializing, middle-income country providing a high quality of life to all its citizens by 2030 in a clean and secure environment. The Vision, with three key pillars, including economic, social and political was set to achieve an average economic growth rate of 10 per cent per annum and sustaining the same until 2030.
Although World Bank projects Kenya’s GDP growth to decelerate to 5.5 per cent, a 0.5 percentage point mark down from the 2016 forecast, it will be above both global and Sub Saharan Africa's estimates of 2.7 and 2.6 per cent respectively.
The expected growth in the global economy is attributed to pick up in the manufacturing and trade, rising confidence, favorable global financial condition and stabilizing commodity prices.
The Sub Saharan Africa economy which is expected to expand by 2.6 per cent this year up from an estimated 1.3 per cent last year is supported by better commodity prices. The growth is expected to continue next year by 3.2 per cent and 3.5 per cent in 2019
Issues like price instability and volatility, low export diversification, less intra-African trade due to protectionism policy and high debt risk are likely to hamper the growth.
The report for instance shows that intra-Africa trade accounted for only 16 per cent, yet trade between Asia, Europe and US averaged 61, 69 and 56 per cent respectively.
Improved access to international financial markets has seen the volume of indebtedness in the region rise from $1.5 billion (Sh150 billion) in 2011 to $7 billion (Sh700 billion) in 2014. Kenya's international debt stands at
''The purpose of this report is to examine global, regional and domestic political and social economic events to facilitate continuing debate on link with Kenya's industry risks and financial stability issues. It captures stability indicators to better support aggregate capital markets data to reflect financial health,'' said CEO Paul Muthaura
Key stability issues affecting Kenya includes high inflation risk,wide budget deficit and high current account deficit. The country's inflation slowed to 7.4 per cent last month down from 9.2 in June and the high of 11.7 in May.
''High inflation rate erodes the purchasing power of savers and investors. The 7.4 per cent is however under the Central Bank of Kenya's ceiling of 7.5 per cent,'' said Luke Ombara, director regulatory policy and strategy, CMA.
This year, the government is targeting a fiscal deficit of Sh582.5 billion down from Sh716.9 billion witnessed in the last financial year.
Other risk factors facing the country's growth includes poor exchange reserve position, political risks and slow activities in the money market.