(Bloomberg) — Fuel subsidies are hurting Kenya’s revenue recovery, the World Bank said as it forecast the nation’s economic growth will slow this year partly because of increased commodity prices.
East Africa’s largest economy will probably expand by 5.5%, compared with 7.5% last year, the World Bank said in it’s Kenya Economic Update published on Tuesday. Growth may further slow in the following period, according to the lender.
The new forecast, an upgrade from 4.9% previously, takes into account a stronger-than-expected recovery from the coronavirus pandemic last year, according to the report. The outlook would have been better but has been weighed on by increases in the prices of fuel, fertilizer and wheat because of Russia’s invasion of Ukraine.
“Offsetting the strong economic momentum generated by the pandemic recovery is the impact of the war in Ukraine,” according to the World Bank report. It has “clouded the outlook for the global economic recovery.”
The government is spending about $66 million monthly on fuel subsidies, which is exerting fiscal pressure and curbing a revenue recovery that had gathered momentum following a rebound in economic activities last year.
“A strong recovery in revenues has supported fiscal performance but this is now being countered by the cost of subsidizing fuel,” according to the report. “The limited passthrough of higher international oil prices to consumers is generating fiscal costs.”
Kenya is vulnerable to the impact of Russia’s war on commodities. That’s despite moderate exposure to Russia and Ukraine, given trade with both countries was around 2.1% in the five years through 2020.
Kenya’s deteriorating outlook is exacerbated by a prolonged drought and a slowdown in investment because of general elections set for Aug. 9.
The “worsening” drought is having a “devastating effect on food security and livelihoods in affected parts of the country and is necessitating increased social spending on food assistance,” according to the report.
Public debt is projected to decline to 64.9% of gross domestic product in 2023-24, compared with an estimate of 68% of GDP in the year through June, according to the lender. That will be if the economy expands at a favorable rate and borrowing costs reduce.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
