Kenya’s economy is projected to expand 4.8% this year supported by favorable weather that will anchor growth in agriculture as well as the services sector.
This is according to a projection by NCBA economists who say good rains experienced this year have helped reduce the prices of food items that have been key in driving down the rate of inflation to 2.7%.
In addition, NCBA Group Managing Director, John Gachora says the good rains will power agriculture, which contributes about a third to Kenya’s economy, to register good growth this year.
The expected growth in agriculture will be supported by other sectors.
“The service sector is expected to maintain resilience, with most sub-sectors projected to grow at near long-term average rates,” says Gachora.
He is however concerned about rising tax burden, pending bills and increasing public debt.
Gachora says the rising and unpredictable tax and statutory deductions challenge cash flow for businesses. Recently, the government implemented the Social Health Authority (SHA) slapping a 2.75% levy on the gross salaries of those in formal employment, a drastic increase from the previous National Hospital Insurance Fund (NHIF) that capped deductions at Kshs 1,700 for those earning more than Kshs 100,000.
He says pending bills that are estimated at Kshs 700 billion comprising Kshs 516 billion for the national government and Kshs 182 billion for counties, are likely to restrict liquidity for the private sector, impacting economic stability.
Gachora is also concerned about public debt, noting that debt servicing is expected to “consume 38% of tax revenue in 2024/2025” fiscal year.
