By Morris Aron

Kenya’s economy will largely remain unaffected by the recent economic growth downgrade by the International Monetary Fund which placed China at its slowest growth rate in 24 years.

Analysts who spoke to The Standard said while Europe and China face economic headwinds, majority of the African economies, Kenya included, will remain largely ‘safe’.

This is save for a dent in the uptake of sovereign bonds in Europe, the potentials of capital flight as the US Federal Reserve raises interest rates and the effects of China re-evaluating her investments.

“The IMF forecast is based on expected demand which can affect investment choices and priorities both by the government and the people in the countries where the slowdown impacts,” said Johnson Nderi, Corporate Advisory manager at ABC Capital.

“Expect pressure on funding in Government spending. On capital flight, higher interest rates in the US will reduce risk appetites, possibly resulting in less capital to the ‘riskier’ emerging markets.”

Low oil prices

IMF projects that as a result of weaker global economic growth, there will be weaker investment in Europe that will overshadow the benefits of low oil prices and a cheaper currency. The IMF also said that the European Central Bank’s anticipated move to expand monetary stimulus by buying sovereign bonds will be slackened.

“The authorities (in the affected countries) are now expected to put greater weight on reducing vulnerabilities from recent rapid credit and investment growth and hence the forecast assumes less of a policy response to the underlying moderation,” the IMF said.

Source:standardmedia.co.ke