Sunday, 3 December 2017

Kenya Gearing for robust growth in 2018


Kenya is revving for faster growth in the coming year, all things remaining the same, we can report. The country, whose growth is among the fastest in the continent, is expected to register slow growth in 2017 compared to 2016.  Last year, national wealth grew by a robust 5.8 percent but is expected to slow down to 5.0 percent or below.
However, all fundamentals for a fast turnaround are in place: the short- rains have been adequate and well distributed, inflation has turned south and will continue to do so as food supply increases, oil prices still look low and the political climate is cooling off albeit with pockets of noise.
The short run headwinds namely; the uncertainties arising from a prolonged electioneering is well behind us, the economic tremor caused by the invalidation of the presidential vote on September 1st is also behind us. The tide is turning in favour of economic prosperity.
 Prolonged drought since the second half of 2016 coupled with poor long rains were the drawback to wealth creation this year, says the Second-Quarter GDP report published by the National Bureau of statistics
There were shortages of all agricultural products including Maize, Sugarcane, coffee, and milk leading to low activity in the agro-processing sector. Shortages mean that someone is not producing and therefore making money and employing others.
Completion of some mega infrastructure projects also slowed down activity in some sectors. Both slow-downs led to layoffs which increased unemployment in the country. However, the resurgence of activity in mega- infrastructure projects including the Thwake Dam, the Lamu- Isiolo highway and the second runway at the JKIA are expected to boost cement consumption and activity in the construction sector.  
These shortages resulted in inflationary pressures that saw overall inflation rise to 8.04 in August before declining to 4.73 in November 2017.
The shilling, which was suffering the ravages of political uncertainty has appreciated to 102.95/103.10 on December 1st from Shs103.75/103.90 in November 14th when the Supreme Court upheld President Kenyatta’s re-election.  It is expected to appreciate further as political risk retreats and investors troop back to the local financial market.
The decline political risk, coupled with increased output in the agricultural sector and the 50 % reduction in electricity tariffs for the manufacturing sector, during the night, has set the stage for robust growth next year as investors dust their shelved investment plans.
There is one potential drawback though, Oil prices are turning north sending a clear signal of a raid into our pockets in the new year. A barrel of crude has hit $64 per barrel which translates into higher pump prices.
 However, the good rains are expected to dampen the pressure as the Hydro-dams levels rise, increasing the amount of cheap-green- energy in the market. 

Experts see a 5.9-6.0 growth rate next year. They see a higher rate in 2019 other being the same.

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