The violence since Kenya’s Dec. 27 election has now gathered a momentum of its own and the upheaval has battered Kenya’s image as an East African trade and tourism hub and one of Africa’s more stable nations. So what is the outlook for East Africa’s biggest economy? Read the views of leading Africa analysts and have your say on how Kenya’s crisis is likely to play out or how it should be resolved.

Richard Segal, Renaissance Capital (see full analysis)

“Persistent currency volatility will have a detrimental impact on sentiment in other asset markets and continue to feed through to the real economy… Tourism and trade have suffered from the political instability but it won’t be long before the slump in business and consumer confidence becomes more entrenched.”

Philippe de Pontet, Eurasia Group (see full analysis)

“At this point, the most hopeful outcome for Kenya would be a power-sharing agreement brokered by mediator Kofi Annan that would bring the stalemate to an end—and unless this happens in the first quarter of 2008, the economic impact of the current standoff could be severe.”

Guest blogger: Richard Segal, Fixed Income Strategist for Renaissance Capital

Reuters is not responsible for the content of this article or for any external internet sites. The views expressed are the author’s alone.

Kenya’s political crisis seemed under control earlier this month when protests lost steam and mediators arrived en masse. The immediate sell-off was short lived, Kibaki proceeded with cabinet formation and the legislature took seats to begin daily business. Meanwhile, Finance Minister Kimunya indicated the Safaricom IPO would go ahead as scheduled in Q1, and many investors began to hope a political compromise could be reached soon.

However, the lull was also short lived, resolution to the crisis proved elusive and the exchange rate has stumbled badly. At KES 63.5/USD, the currency is off 15% from pre-election levels and stands at an 18-month low. Furthermore, the outlook for the shilling remains bearish, and all natural holders have signalled an unwillingness to hold the unit. Some traders had expected the central bank to step in to damp volatility, but it has stayed away, perhaps not being willing to supply the market with “cheap dollars.”

Persistent currency volatility will have a detrimental impact on sentiment in other asset markets and continue to feed through to the real economy. Meanwhile, bankers have warned that non-performing loans could accelerate. Tourism and trade have suffered from the political instability but it won’t be long before the slump in business and consumer confidence becomes more entrenched. Regional contagion was initially limited to logistical sectors, but Uganda, Tanzania and other countries will not remain so lucky for long.

To have your say on Kenyan politics and the economy see our discussion blog.

Guest blogger: Philippe de Pontet, Africa Analyst with Eurasia Group

Reuters is not responsible for the content of this article or for any external internet sites. The views expressed are the author’s alone.

With solid GDP growth, a diversified economy and one of the fastest-growing stock markets in the world, Kenya was supposed to be the poster child for booming African frontier markets heading into 2008. Instead, less than one month after a deeply flawed election reinstated Mwai Kibaki as president, the country has been plunged into political crisis, sporadic ethnic violence and economic decline with no resolution in sight.

The 27 December election in Kenya set the political crisis in motion, by tapping into resentment aimed at the dominant Kikuyu tribe and government corruption more broadly. There is a moderate risk (30%) that the current political stalemate will persist into the second half of 2008, undermining the governability of the country, and incapacitating Kibaki in the process. At this point, the most hopeful outcome for Kenya would be a power-sharing agreement brokered by mediator Kofi Annan that would bring the stalemate to an end—and unless this happens in the first quarter of 2008, the economic impact of the current standoff could be severe. More likely, however, is deep gridlock between the opposition controlled parliament and the Kibaki administration, blocking Kibaki’s agenda at every turn.

The much-anticipated Safaricom IPO and the sovereign bond issue will both be delayed (by several months or more), forcing the government to borrow more domestically to plug its 5.3% budget deficit. In this volatile climate, though, risk-tolerant investors betting on an eventual political resolution and on Kenya’s relatively sound fundamentals, may find opportunities amid the current crisis.

To have your say on Kenyan politics and the economy visit our discussion blog.