This archive report was first published on 1 November 2019.
The National Treasury has revised its economic growth forecast downwards by Sh400 billion, a move that reflects the country's turbulent economic landscape. According to the Treasury's budget documents, the projected size of the economy by the end of June 2020 is now estimated to be Sh10.4 trillion, down from the initial estimate of Sh10.8 trillion.
The downward revision is attributed to the slowdown witnessed in the first six months of 2019, which has been exacerbated by poor rains and a tough business environment. The International Monetary Fund has also downgraded the country's GDP growth projections for the current financial year from 5.8 per cent to 5.6 per cent, citing the country's weighing down by a tough business and household environment.
Further, the Treasury has projected a wider fiscal deficit, meaning it will have to borrow even more in the financial year to June 2020. This is due to an expected reduction in donor grants this year, as well as the widening deficit being fuelled by an underperforming agriculture sector.
Many companies in the private sector have resorted to firing workers to survive the stormy economic conditions, citing crippling government policies and punitive tax measures as major concerns. The situation has forced the Kenya Revenue Authority to come down hard on businesses, though this has had the unintended consequence of shutting down several firms unable to comply with the taxman's harsh conditions.
“We are operating under tight resource constraints amid significant expenditure demands, including financing of the government's 'Big Four' Plan. This calls for proper prioritisation to ensure that our expenditures go to the most impactful programmes with highest welfare benefits to Kenyans,” said the Treasury in the 2019 Budget Review and Outlook Paper (BROP).
