Kenya Economic Forecast

Kenya Economic Outlook

October 16, 2018

The economy gained traction in the second quarter, reflecting an upturn in most sectors. Notably, hydro-powered electricity generation rose at a markedly swifter rate, thanks to heavy rainfalls, as did the agricultural sector, which accelerated at the fastest pace in two years. However, overall private sector activity lost traction in the third quarter compared to the previous two quarters, reflected by a lower PMI on average. Increased business uncertainty, owing to new fiscal year tax measures in Q3, will likely lead to a more moderate expansion compared to the second quarter. Meanwhile, confronted with growing popular opposition to the newly-imposed VAT on petroleum products, in late September parliament approved President Uhuru Kenyatta’s calls to halve it to 8%. While Kenyatta has announced budget cuts across all government departments to strengthen the country’s deteriorating fiscal metrics, the World Bank recently stressed the need for greater focus on reducing recurrent expenditures rather than development spending, which is likely to hurt the economy’s underlying growth potential.

Kenya Economic Growth

Growth is expected to pick up next year, underpinned by solid domestic demand and strong capital inflows. However, parliament’s decision to maintain the interest rate cap on commercial bank lending rates, along with the slow pace of fiscal tightening, may limit the government’s ability to secure additional funds from the IMF and other lenders to finance the FY 2018–2019 budget. Met the why particular analysts project GDP growth of 5.8% in 2019, which is down 0.1 percentage points from last month’s forecast, and also 5.8% in 2020.

Kenya Economy Data

20132014201520162017
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 %)5.95.45.75.94.9
Consumption (annual variation in %)8.44.35.24.77.0
Investment (annual variation in %)2.114.26.6-9.46.3
Industrial Production (annual variation in %)5.45.66.16.04.9
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)7.26.08.06.44.5
Inflation Rate (CPI, annual variation in %)5.76.96.66.38.0
Policy Interest Rate (%)8.508.5011.5011.0011.00
Exchange Rate (vs USD)86.4590.55112.3112.5113.2
Exchange Rate (vs USD, aop)86.1387.9598.27111.5113.4
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)-11.5-12.4-11.1-7.9-11.9
Exports (USD billion)5.96.15.95.75.7
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)6.67.97.57.67.3
External Debt (% of GDP)19.321.024.931.330.5

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Kenya Facts

ValueChangeDate
Bond Yield12.750.0 %Oct 18
Exchange Rate111.10.05 %Oct 18
Stock Market0.10.0 %Oct 17

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