Kenya says Russia-Ukraine conflict, US rate hike to dampen 2023 economic prospects

The National Treasury of Kenya is buoyant with sustained economic growth this year, but warns that the outlook could be dampened by rising external shocks that include the Russia-Ukraine conflict and US interest rate hikes.

The Treasury said while it expects the economy to grow 6.1 per cent in 2023 and maintain that momentum over the medium-term, global uncertainties could impact growth, Xinhua news agency reported.

“There is the possible worsening of the Russia-Ukraine conflict, which heightens the risk of oil and commodity price volatility, elevated inflationary pressures and the lingering effects of the Covid-19 pandemic,” it said in a proposed Budget Policy Statement for 2023 issued on Thursday.

It added that tightening the global monetary policy, especially in the US, could increase volatility in the financial markets, hurting the local currency.

For the first time in five years, Kenya’s inflation rate, which stood at 9.1 per cent in December 2022, remains above the government target of 5 per cent, mainly driven by supply-side constraints occasioned by external shocks and climate-related food and energy prices.

Treasury Cabinet Secretary Njuguna Ndung’u noted in the document that as part of the country’s economic turnaround plan, the government will scale up revenue collection to 3 trillion Kenyan shillings (about $24 billion) in the 2023/2024 financial year and $32 billion over the medium term.

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