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Kenya’s economy is expected to experience slower growth this year, likely falling below the benchmark of 5.4%, due to the impacts of recent flooding. S&P Global predicts a decrease of 0.3 percentage points in economic growth for 2024 compared to previous forecasts, as flooding from above-average rainfall has caused significant disruptions in sectors like agriculture, transportation, and retail.
The 2024 floods are anticipated to have a more severe impact on GDP than the 2018 floods, particularly affecting Nairobi, which contributes 28.3% to the national GDP. The disruptions include temporary closures of rail services and retail disruptions due to damaged infrastructure.
Additionally, anti-government protests and adjustments to the Finance Bill 2024 are also influencing economic conditions. The increase in imports due to crop damage and heightened demand for goods is expected to exacerbate the current-account deficit, projected at 5.6% of GDP.
S&P Global notes that while exports, especially tea, should remain stable, increased food imports will be necessary due to domestic supply chain disruptions. The current-account deficit may pressure the Kenyan shilling, leading to a slower pace of monetary easing by the Central Bank of Kenya.
The fiscal position is under strain, with recurring expenses consuming a significant portion of revenue. Efforts to enhance revenue generation are critical, as the Kenyan Revenue Authority fell short of its tax collection targets for the 2023-2024 fiscal year.
Overall, the combination of natural disasters, political factors, and economic challenges poses significant hurdles for Kenya’s growth prospects.