Kenya Economic Forecast

Kenya Economic Outlook

December 13, 2018

The economy likely sustained a solid pace of growth in the final quarter: Private sector activity seems to have expanded robustly in October and November, despite losing some momentum from H1, while the arrival of the short rainy season likely boosted agricultural and hydro-powered electricity output. That said, a slowdown in remittance inflows, rising inflationary pressures—mainly owing to the adoption of the 8% VAT on fuel—and continued lackluster credit growth, which bode ill for household incomes, point to weaker private spending in the quarter. Moreover, although the introduction of the VAT has improved the fiscal account, the misalignment between overly optimistic revenue targets and the government’s spending plans raises concerns about its ability to satisfy its fiscal consolidation goals. In view of making debt repayments more manageable, the country is looking to roll over a syndicated loan worth USD 760 million and extend the maturity of the debt.

Kenya Economic Growth

Growth momentum will likely be sustained in 2019, as healthy remittance inflows and a tighter labor market drive solid private consumption, while upbeat business confidence fuels a strong expansion in fixed investment. However, the prevalence of the interest rate cap will likely continue to limit the availability of credit and could hinder the government’s ability to secure additional funding from the IMF. This, coupled with fiscal tightening measures, pose headwinds to the outlook. FocusEconomics analysts project GDP growth of 5.8% in 2019, which is unchanged from last month’s forecast, and 5.7% in 2020.

Kenya Economy Data

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 %)
Consumption (annual variation in %)
Investment (annual variation in %)
Industrial Production (annual variation in %)
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)
Inflation Rate (CPI, annual variation in %)
Policy Interest Rate (%)8.508.5011.5010.0010.00
Exchange Rate (vs USD)86.4590.55102.3102.5103.2
Exchange Rate (vs USD, aop)86.1387.9598.27101.5103.4
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)-10.5-12.4-10.1-7.9-10.9
Exports (USD billion)
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)
External Debt (% of GDP)19.321.024.931.330.5

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Kenya Facts

Bond Yield12.510.0 %Jan 16
Exchange Rate101.80.05 %Jan 16
Stock Market0.20.0 %Jan 16

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