Stanchart projects sluggish economic growth

Standard Chartered Bank is projecting a depressed economic growth of 4.6 percent this year, which it says will largely be affected by weak private sector investments.

The projection the bank says will be highly influenced by the capping of interest rates in the country.

According to the bank’s, chief economist for Africa Razia Khan, the government will have to review the capped interest rates to pave way for economic growth with a focus on the private sector going forward.

“Kenya has lost a lot of its growth dynamism by an interest rates lone rate cap, an interest rate structure that doesn’t ultimately serve its economic need. Kenya is going to come under greater pressure to raise government revenue, it needs a thriving private sector to be able to do that,” Ms Khan said.

“The interest rate cap will have to be reviewed,” she added.

Her sentiments come barely a day after the Central Bank of Kenya had echoed the same arguing the interest rate cap had put brakes on the country’s economy.

“So far interest capping rates are acting as a break in the economy…….and that is another set of issues, another set of factors that will need to bring to the fore and deal with so as to support rather than inhibit economic dynamism,” Central Bank governor Dr Patrick Njoroge said during a briefing.

Ms Khan said the near flat out growth would also be attributed to expected rise in crude oil prices and weak private sector growth linked to tightening liquidity.

At 4.6 percent growth projection, the Stanchart numbers fall behind other economic outlooks.

On Tuesday the Central Bank of Kenya had exuded confidence the economy would grow by 6.2 percent in 2018 while Stanbic Bank also gave a conservative projection of 5.6 percent growth due to spending on infrastructure.

Barclays Bank Kenya estimates 2018 economic growth at 5.5 percent supported by political calm and improved weather patterns.

All these projections though cautious on the rate caps.

“We can’t assume that a quick change is going to bring instant economic activity. For many frontier economies like Kenya, that time period, we may see a majority of the impact over at least a 12 month period,” Ms Khan added.

The central bank continues to hold its benchmark lending rate at 10 percent now in its sixteenth month following uncertainty in the transmission of the monetary policy.