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Kenya's political crisis may be over – but its economy is yet to be fixed

Simon Maina | AFP | Getty Images

Kenya's political leadership is set for more of the same as the country's incumbent President Uhuru Kenyatta is to be sworn in for a second term next week, following the country's Supreme Court validating his second election victory in a several months-long political saga.

"There has already been a sense of return to 'business as usual' in Nairobi in the past week," Patricia Rodrigues, associate analyst at Control Risks, told CNBC.

According to Reuters, the Kenyan shilling is trading at its highest against the U.S. dollar in two months, "building on gains since the Supreme Court ruling." The Kenyan benchmark NSE-20 climbed 3 percent after the verdict, Reuters reported, though the index dropped Thursday for the first time since the vote due to investor profit taking.

The short-lived upwards momentum indicates that while the east African country's economy has potential, dark clouds continue to linger on the horizon.

"Kenyatta's pro-business and pro-international investment approach is likely to continue in his second term, which bodes well for economic growth," said Rodrigues. The International Monetary Fund cites gross domestic product (GDP) growth to fall to 5 percent in 2017. While this is down from last year's 5.8 percent figure, it still remains above the 4.6 percent average for emerging market and developing economies.

"More populist policies such as the cap on bank's interest rates are likely to come under review, while the country's early oil production scheme is likely to restart in coming months with increased vigor," added Rodrigues.

Kenya's President-elect Uhuru Kenyatta (L) and his running mate William Ruto hold up certificates of election October 30, 2017.
Tony Karumba | AFP | Getty Images
Kenya's President-elect Uhuru Kenyatta (L) and his running mate William Ruto hold up certificates of election October 30, 2017.

Kenya placed third in sub-Saharan Africa in the World Bank's Ease of Doing Business 2017 ranking published in October, 80th out of the 190 countries considered. "This is Kenya's best performance on the index in over a decade and reflects that reforms to streamline government bureaucratic processes and reduce waiting times for investors are taking effect," Rodrigues added.

Kenyatta won his second election in under three months in late October, registering 98 percent of the vote, though less than half of the country's electorate showed up at the polls. Both votes were brought to the country's Supreme Court, with the first victory being declared unconstitutional.

The country's main opposition, the National Super Alliance (NASA), described the Supreme Court's ruling Monday as a "decision taken under duress," in a statement released Monday. "We do not condemn the Court, we sympathize with it," for having its hands tied, the statement continued.

Rodrigues suggested that election fatigue meant that associated violence and social unrest with the elections is unlikely to be sustained.

But, she added that the country continues to struggle with "endemic corruption given the vested business interests of some politicians." A NASA-led boycott of several major companies in the country could also impact supply chains.

Rodrigues also pointed out that rising government debt could be a concern. According to Reuters, national debt rose to over 50 percent of GDP in 2017. "A significant amount of the government's commercial debt will mature in 2019, making 2018 a crucial year for the country's economic performance," she added.