The Parliamentary Budget Office has lowered economic growth prospects in 2019/20 fiscal year to 5.6 per cent against the 6.2 per cent projection by Treasury.
House economy advisory team says slow implementation of capital projects, poor weather and impact of rising inflation will suppress economic growth.
The office says treasury needs to formulate ways of accelerating projects to avoid cost outlays and rein in on rising cost of goods and services.
The 2019/2020 budget is pegged on an economic growth projection of 6.2 percent in 2019; single digit inflation low and stable interest rates as well as narrowing current account deficit.
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The economic outlook is premised on stable weather conditions, strong service sector, ongoing infrastructure investments and sustained business confidence.
However the Parliamentary budget office says a lot seems to be going against the outlook.
The office says the delayed onset of long rains will adversely affect the planting season leading to a low food production in many parts of the country.
According to the meteorological department the amount of rainfall for most parts of the country is currently below 55 percent of what is normally experienced.
As a result, there is likelihood of higher inflation on account of food scarcity and higher electricity prices; reduced income for majority of rural dwellers who rely on income from agricultural activities; reduced agro-processing output and a possible widening of the current account deficit due to reduced agricultural exports.
PBO warns that if the current trend persists, inflation is likely to reach 11 percent by close of December 2019.
The office has also faulted the rising number of stalled capital projects.
A review of the Exchequer releases as at end of March 2019 indicates three months to the end of the financial year; only 54% of development funds have been released.
The budget office has also weighed in on the ongoing trade tensions between the US and China saying this will likely have a negative impact Kenya’s commodity exports to China and the US.
Treasury expects to spend 3.18 trillion shillings in the 2020/21 fiscal year for recurrent as well as development expenditure.
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