Kenya Economic Forecast

Kenya Economic Outlook

November 13, 2018

Private sector activity slightly moderated in the third quarter from the previous quarter due to waning business confidence and concerns over the new fiscal year tax measures. On the upside, the arrival of the short rainy season should buoy agricultural output and hydro-powered electricity generation in the fourth quarter. An acceleration in activity at the outset of Q4 hinted at this, reflected by a rise in the PMI in October. However, the advent of heavy rains—which have intensified in recent years—have heightened the risk of floods and landslides, which could lead to disruptions. On the upside, rising remittances have bolstered household incomes and, in turn, private spending, helping to narrow the current account deficit. The latest data shows that remittances rose more than 55% in Q2, while the current account deficit fell by more than 30%.

Kenya Economic Growth

Robust growth is expected next year, supported by strong domestic demand and healthy capital inflows. Solid private consumption underpinned by buoyant remittance inflows, coupled with an acceleration in fixed investment growth fueled by stronger business confidence, should drive the economy. However, the continuation of the interest rate cap on commercial bank lending rates could constrain the government’s ability to secure additional funds from the IMF and thus finance the FY 2018–2019 budget. This, compounded by the government’s fiscal tightening measures, cloud the outlook. FocusEconomics analysts project GDP growth of 5.8% in 2019, which is unchanged from last month’s forecast, and 5.8% again in 2020.

Kenya Economy Data

Population (million)41.843.044.245.546.7
GDP per capita (USD)1,3221,4341,4331,5661,599
GDP (USD bn)55.361.763.371.274.7
Economic Growth (GDP, annual variation in %)
Consumption (annual variation in %)
Investment (annual variation in %)
Industrial Production (annual variation in %)
Fiscal Balance (% of GDP)-6.8-7.0-9.6-8.0-9.5
Public Debt (% of GDP)44.545.950.253.259.0
Money (annual variation in %)14.518.612.84.87.5
Inflation Rate (CPI, annual variation in %, eop)
Inflation Rate (CPI, annual variation in %)
Exchange Rate (vs USD)86.4590.55102.3102.5103.2
Policy Interest Rate (%)8.508.5011.5010.0010.00
Exchange Rate (vs USD, aop)86.1387.9598.27101.5103.4
Current Account (% of GDP)-8.1-9.7-6.8-5.1-6.8
Current Account Balance (USD bn)-4.5-6.0-4.3-3.7-5.1
Trade Balance (USD billion)-10.5-12.4-10.1-7.9-10.9
Exports (USD billion)
Imports (USD billion)16.418.515.913.616.6
Exports (annual variation in %)-4.02.7-3.4-2.40.2
Imports (annual variation in %)0.412.6-13.8-14.422.0
International Reserves (USD)
External Debt (% of GDP)19.321.024.931.330.5

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Kenya Facts

Bond Yield12.510.0 %Dec 11
Exchange Rate102.70.05 %Dec 11
Stock Market0.20.0 %Dec 11

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