(Adds analyst, background)
By Duncan Miriri
NAIROBI, May 20 (Reuters) - A Kenyan government minister predicted on Tuesday that economic growth will only slow marginally to 6.5 percent from 7 percent in 2007 despite a post-election crisis that hurt key sectors.
But analysts said that forecast was unrealistic -- one called it "propaganda" -- given the first quarter slump in tourism, agriculture, transport and manufacturing as a result of political paralysis and fighting over the December poll.
Post-crisis inflation, which hit 26.6 percent year-on-year in April, will also hurt growth, they said.
The surprisingly optimistic growth figure came from Planning and National Development Minister Wycliffe Oparanya at a meeting to discuss the new coalition government's economic agenda.
After fighting that killed at least 1,300 people and displaced 300,000 in January and February, President Mwai Kibaki's government and Raila Odinga's opposition party formed a "grand coalition" for the sake of peace.
"The economic survey report that I will release on Thursday will show the economy grew by 7 percent for the period up to December 2007. This year, because of the problems, we are expecting 6.5 percent," Oparanya told journalists.
That figure contrasted with revised estimates of between 4-6 percent given last month by Finance Minister Amos Kimunya. And a Reuters poll of 11 analysts and businessmen in April predicted, on average, that growth would drop to 3.8 percent.
One independent Kenyan-based economist, Robert Shaw, told Reuters on Tuesday that he in fact expected just 2-3 percent growth in east Africa's largest economy, which is an anchor for the region.
"He is basically giving propaganda, it is completely wrong," Shaw said of Oparanya's prediction. "He must be the only person in Kenya that believes this."
EXTRA SPENDING
Oparanya said the east African country's budget deficit would rise to 200 billion shillings ($3.21 billion) in the 2008/09 (July-June) fiscal year from 109.8 billion shillings for the current year.
"I anticipate 200 billion shillings deficit in the 2008/09 financial year because of infrastructural requirements," he said.
Kimunya is expected to read the country's budget for the coming financial year in June.
Last year, Kenya planned to spend 693.6 billion shillings.
The government would plug the shortfall through donor funds and further privatisation of state-owned companies such as the National Bank, Oparanya said.
The government had also planned to sell a $300 million Eurobond in the first quarter but shelved the plans.
Analysts expect it to launch the bond after completion of an initial public offer in Safaricom [SCOM.NR].
Kenya is selling 25 percent stake in the country's leading mobile phone provider to raise at least 50 billion shillings in what would be east Africa's biggest ever IPO.
Brokers believe the issue has been over-subscribed by about 400 percent in a sign of investor confidence that Kenya's economy will rebound.
While transport and industry are back to pre-crisis levels, tourism, one of Kenya's biggest foreign exchange earners, remains severely dented, with first quarter revenues diving 54 percent from a year earlier.
Coffee, tea and horticulture sectors were not too badly affected by the crisis, but staple food production was interrupted at the start of the year, leading to shortages now.
Agriculture Minister William Ruto told Reuters on Tuesday the government would import three million bags of maize to plug a shortfall of the staple after violent mobs destroyed 3.5 million bags during the turmoil.
- Additional reporting by Helen Nyambura-Mwaura (For full Reuters Africa coverage and to have your say on the top issues, visit: http://africa.reuters.com/) (Writing by Helen Nyambura-Mwaura; Editing by Andrew Cawthorne and Ron Askew)
