Paul Redfern
2 November 2008
London — Kenyan economic growth could halve over the next year mainly because of falling remittances from many local expatriates living in the UK and the United States.
Economic experts had been predicting that the economy could be less affected by the financial and economic crisis gripping the West and acknowledged that Kenya's financial system had remained insulated from the credit crunch for over a year.
Growth prospects are, however, now being revised to take account of the fact that when the financial crisis that started on Wall Street began to hit workers in the US, it had a knock-on effect on the economic wellbeing of many Kenyans who benefited from family members working in the West.
The Financial Times newspaper reported that last year $574m was wired to Kenya through formal channels by members of its diaspora.
This year, even before the financial crisis escalated, data from Kenya for July and August showed remittances declining, both from the previous month and year on year - a sign of overseas Kenyans struggling with inflation, mortgage payments, job insecurity or redundancy.
It is estimated that 50 per cent of all remittances to Kenya came from the US, which is home to between 750,000 and a million Kenyans.
Such remittances have been used to invest in property and shares on the Nairobi Stock Market and to help meet school fees and the daily living expenses of families.
Central Bank statistics do not include remittances sent through unlicensed money traders or cash brought back to Kenya by hand.
The pinch of the economic downturn is also being felt by Kenyans in the UK, who number around 200,000 according to Kenya's Foreign ministry.
Mr Sam Ochieng, the Kenyan director of international programmes at Sacoma, a group that provides employment and business advice to Africans in the UK, says that in the past month, he has seen a rise in job losses and business closures.
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