Kenya’s return to robust economic growth is hinged on the rate at which key sectors assume normalcy, following a decision by the Government to undertake a stimulus package to counter the combined effects of drought, post election violence, and global financial turmoil.

CFC Stanbic Financial Services is forecasting such a turnaround will, however, be driven more by non-traditional sectors, in light of the dismal performance of agriculture, which has been the backbone of economic growth.

"We have seen the economy rebalancing with some sectors becoming more prominent," said Judd Murigi, the head of research at CFC Stanbic Financial Services.

The coffee, sugarcane, tea, cement, hotels and restaurants industries are expected to outperform overall gross domestic product growth this year, as a result of high production levels, favourable market, and commodity prices.

Other sectors include real estate, telecommunication, and education services.

According to CFCSFS, by the end of the third quarter, activity in the coffee, hotel and restaurant sector had risen more than 40 per cent above that of a similar period last year, while sugarcane, cement, and telecommunications rose 10 per cent.

Beer manufacturers and banks will follow GDP trends, while dry grains, horticulture, wholesale and retail trades are expected to perform below the expected GDP growth this year.

CFCSFS approximations indicate beer and banking sectors have grown four per cent in the year to July, compared to a similar period last year, and are expected to maintain the same growth in the final quarter of the year as risk aversions decline in the banking sector.

According to the approximations, horticulture fell seven per cent, while dry grains, particularly maize harvest, are expected to drop 40 per cent by the end of the year.

The NSE 20-share index, which gives an indication of the performance of the bourse, will continue recovering in the months ahead.

Foreign investors, who make 40 per cent of the capital market, are expected to continue dominating, due to the perception that the Kenyan market is undervalued.

On the fiscal and monetary front, CFCSFS reckons that headline inflation will keep reducing if the rains continue, while prudent open market operations from Central Bank will continue to contain interest rates.

The shilling is expected to hold steady against the dollar and the pound in the coming months, although it could depreciate against other major currencies.

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