Analyst upbeat about Kenya’s growth prospects

Razia Khan, Standard Chartered's chief economist for Africa (PHOTO: COURTESY)

Kenya’s economy is projected to grow by 5.8 per cent this year shrugging off headwinds in the global economy and the polls scheduled for next year.

According to data from Standard Chartered Bank, Kenya’s economy remains resilient in the face of a stronger US economy, a slowdown in China’s growth and a slump in the global commodity market with our Gross Domestic Product (GDP) expected to expand by 6 per cent by next year.

According to Razia Khan (pictured), Standard Chartered’s chief economist for Africa, Kenya’s current fiscal policy will help the country absorb a huge portion of the global economic headwinds whilst still attracting much-needed foreign direct investment.

“There are fears that the strengthening of the US economy will mean a tightening of fiscal policy and most analysts are expecting four more rounds of interest rate hikes and this will impact foreign direct inflows into frontier African economies including Kenya and our dollar-denominated debt,” she said.

The US last month raised its key interest rate from a range of 0 to 0.25 per cent to a range of 0.25 to 0.5 per cent for the first time in more than eight years within which time African countries, including Kenya, had managed to chalk up substantive capital inflows and foreign debt.

A rate hike would mean constrained FDI coupled with an increase in the cost of servicing external debt with the private sector and consumers set to be hard hit.

However, Kenya’s monetary policy stance has won the country praise with analysts expecting the country to weather the anticipated turbulence. “The monetary policy committee acted pre-emptively when the Kenyan currency depreciated and that action gained the CBK a lot of credibility and they have the space to cut rates if the market conditions demand that,” she said.

CBK yesterday chose to maintain the base lending rate at 11.5 per cent. Consumers are further expected to witness an easing of interest rates and inflation beginning the second half of this year despite heightened political temperatures as the country moves into the election year.