Kenya: Planning Ministry Sees 5.5-6% Gdp Growth in 2006 After 5.8% Last Year, but Figures Seem at Odds with Actual Output Data; Still Little Hope of Early Imf Funds

Summary

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Ahead of the 15 June budget, the annual economic survey from the planning and national development ministry is meant to set the scene for revenue collection and policy for the year ahead. However, this survey takes a decidedly upbeat view of developments that is not fully justified in our view, reporting GDP growth of 5.8% last year, with agricultural sector growth at 6.7% despite the impact of drought, and projecting 5.5-6.0% for 2006. Both these forecasts are significantly above earlier projections - the CBK still sees 2005 growth at 5.2% but has yet to produce any sectoral breakdown. Although some sectors have been buoyant, most notably tourism which is growing at around 18% and construction, other CBK monthly data do not appear to bear out such planning ministry optimism. The IMF review mission last month was also quite bullish about economic prospects, as well as on issues such as fiscal policy and structural reforms, but is demanding more progress on governance and fighting corruption before the much-delayed third tranche of the USD327m three-year facility can be released. The Fund's concerns may well be heightened by the latest TI findings that corruption is on the rise again, and the prospect of a resumption of funding is looking increasingly unlikely this year. More positively, headline inflation is subsiding from the March high of 19.1% as food shortages recede, with May inflation down to 13.1% and further falls ahead.

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Kenya: Planning Ministry Sees 5.5-6% Gdp Growth in 2006 After 5.8% Last Year, but Figures Seem at Odds with Actual Output Data; Still Little Hope of Early Imf Funds

GDP growth now raised to 5.8% in 2005...

The official figures on GDP growth appear to get better and better despite the absence of any real signs of improvement in much of the output data produced by the Central Bank of Kenya (CBK). In its annual economic survey published at the end of May, the ministry of planning and national development now reports that GDP grew 5.8% in 2005, up from 4.9% in 2004 and the best performance in a decade. The survey is released ahead of the budget, due on 15 June, and forms the basis for revenue collection and economic policy. ...

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