A promising year; Is Kenya’s year too good to be true?
No, economists are seeing all the numbers hitting the right dial throughout the year with very minimal risks to stop a 5.5 percent economic expansion.
Although no one can rule out unforeseen risks, the only risk cited by the latest consensus of Focus Economics is a limitation of how much the government can spend, as the debt burden continues to mount.
The economists said that while reduced political tensions will continue to lift confidence, a tighter fiscal policy will restrain the stride at which the economy will grow.
FocusEconomics analysts project GDP expanding 5.5 percent in 2018, which is unchanged from last month’s forecast, and 5.8 percent in 2019.
Stanbic Bank’s Purchasing Managers Index the PMI in April shot up to the highest mark since January 2016, signaling that business conditions in the private sector brightened for the third consecutive month.
Exports picked up at the start of the year, growing at a double-digit pace in January and February, while imports slowed significantly, narrowing the trade deficit.
Meanwhile, improved weather conditions are helping to buoy agricultural output.
Inflation dropped to a multi-year low of 3.7 percent in April from 4.2 percent in March.
The Central Bank reduced the Bank Rate by 50 basis points to 9.50 percent at its last meeting held on 19 March. FocusEconomics expects the policy rate to fall throughout this year as the Bank administers more rate cuts, with a Consensus Forecast of 8.92 percent for the end of 2018.
This is expected to come in the framework of government’s pledge to “eliminate or significantly modify” an interest rate cap on commercial bank lending rates that has stymied private sector credit growth, although the timing of its removal is still unclear.
In the year when the shilling rose actively against the dollar to below 100 units for the first time in February hitting a 20 month high, the currency seems stable enough to ride the year.
Strong remittance inflows have helped the shilling remain largely steady in recent months, while the Central Bank’s healthy foreign reserves have allowed it to act as a buffer in case of volatility.