CBK, World Bank differ on Kenya’s growth forecast
Two of the most authoritative financial governing bodies in the Kenyan context have announced varying growth predictions in 2023–24, with the Central Bank of Kenya (CBK) putting forward a rosier picture than the World Bank amid fears of a global recession.
Speaking to Bloomberg on the sidelines of the just concluded World Economic Forum in Davos, Switzerland, CBK Governor Dr Patrick Njoroge forecast Kenya’s Gross Domestic Product (GDP) to grow by 6.2 percent this year, towering above the World Bank’s 5.2 percent growth projection issued last December.
“Kenya’s medium-term growth prospects remain positive with GDP projected to grow by 5.2 percent on average in 2023–24 notwithstanding current global and domestic shocks,” said the World Bank in a press release dated December 8, 2022.
“This year we expect growth to bounce up to 6.2 percent. Last year our growth was 5.6 percent and that was a complicated year, which followed growth in 2021 at 7.5 percent and in the peak of the pandemic it was just a contraction of 0.3 percent. So you can see the trend, and we are getting a respectable growth this year,” Dr Njoroge told Bloomberg‘s Francine Lacqua.
The Central Bank head acknowledged that although the local economy will to some extent be drawn down by the looming recession, the country will benefit from its expected recovery in the second half, adding that Kenya is less exposed to upheavals in advanced economies because of being “very local in terms of trading partners.”
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Dr Njoroge’s positive view appears in sync with projections made by the African Development Bank which says Africa is set to outperform the rest of the world in economic growth over the next two years, with GDP for East African countries projected to recover to the pre-pandemic average above 5 percent in 2023 and 2024.
Concerning the teetering local currency—which declined 9 percent against the dollar last year and 0.54 percent so far this year—Dr Njoroge refrained from projecting the trajectory that the shilling might take, instead leaving the local unit to prevailing market forces.
The shilling’s tailspin in 2022 was primarily caused by a bullish dollar on the back of multiple aggressive rate hikes by USA’s Federal Reserve, while supply and demand forces also had their input.
On the one hand, dollar demand from importers more than doubled in the review period weighed on the country’s forex reserves, on the other hand, 14 percent increase in imports and a 25 percent jump in remittances from abroad eased the pressure.
The bank is also comfortable with the current state and projections for its foreign exchange reserves, Dr Njoroge said, after those reserves slipped below the required four months’ worth of import cover last November, and expects more external financing to support the government budget.
