Kenya Economic Outlook
The economy likely decelerated in Q2 compared to the preceding quarter. The lower average PMI in Q2 compared to Q1 pointed to a faster deterioration in private-sector conditions, while a slight year-on-year fall in remittances likely capped private spending. In Q3, economic momentum is expected to be steady. On the one hand, receding price pressures and sharp growth in annual remittances in July–August likely supported consumption. On the other hand, recent tax hikes and protests likely hurt purchasing power and investment, respectively. Additionally, in July–August, the PMI remained at levels similar to those in Q2. In other news, in early September, the Supreme Court confirmed the constitutionality of the government’s 2023 finance law, maintaining the housing levy and the doubling of the fuel VAT, which have been in place since late July.
Kenya Inflation
Inflation came in at 6.7% in August (July: 7.3%) on softer price pressures for food and housing. In 2023, inflation will likely rise above 2022’s average due to currency devaluation, tax hikes, and last year’s removal of the petrol subsidy. Key factors to monitor include potential weather events, the potential reversal of some tax hikes and oil prices.
This chart displays Economic Growth (GDP, annual variation in %) for Kenya from 2013 to 2022.