Kenya Economic Outlook
After growth slowed to 4.7% in Q3 2022, the economy likely decelerated further in the fourth quarter. In Q4, household consumption and private investment should have been negatively affected by elevated inflation and rising interest rates. Moreover, drought will have weighed on agricultural output. However, merchandise exports continued to grow at a double-digit rate in annual terms throughout the quarter, while the private-sector PMI averaged higher in October–December than in Q3. The economy seemingly got off to a strong start in 2023, with the PMI rising to an 11-month high in January and remittances growth accelerating during the same month. Also in January, the government unveiled a bill designed to accelerate its privatization drive, boding well for economic activity in the medium term.
Inflation came in at 9.0% in January (December: 9.1%), driven by milder increases in the prices of food and nonalcoholic beverages. For 2023, inflation is expected to recede amid cheaper oil imports and the dampening effect of domestic rate hikes. Extreme weather events and additional currency depreciation are upside risks.