CBK boss sees 2018 best year

Central Bank of Kenya (CBK) Governor Patrick Njoroge says that early indicators point to the economy having expanded by 5.8 per cent in the first quarter of 2018.

Speaking on Tuesday in Nairobi, Dr Njoroge said a strong performance is expected this year supported by recovery in agriculture, resilient services sector, increased optimism and stable macro-economic environment.

“Leading indicators for 2018 show a very favourable performance in Q1. The estimated growth rate in first quarter was in the order of 5.8 per cent,” he said.

The toning down of political rhetoric since President Uhuru Kenyatta and Opposition leader Raila Odinga agreed to work together has also helped in the rebound of the economy.

If confirmed by Kenya National Bureau of Statistics (KNBS), the growth will be an acceleration from a five per cent expansion in the previous similar quarter of last year. It will also be the strongest growth rate since the last quarter of 2016.

Terming the expected growth as a “world of difference” from what it was in the first quarter of 2017, the governor explained that CBK had observed sustained macroeconomic stability, favourable weather conditions, increased optimism and narrowing current account deficit.

Current account deficit

KNBS data, showed that the economy expanded by 4.9 per cent in full-year of 2017, being the lowest Gross Domestic Product (GDP) growth in five years. Last year’s performance came against a backdrop of drought, lengthy period of elections and depressed private sector credit growth.

Njoroge said current account deficit is expected to narrow from 6.7 per cent to 5.5 per cent pegged on strong performance of exports such as tea and horticulture. “Exports, particularly tea, appear to be quite strong in terms of volume and price. We have diversified our partners in terms of tea exports and that works in our favour not only in terms of better pricing but also stability of destination,” he said.

Kenya has reduced reliance on traditional markets such as Sri Lanka by expanding to new markets in Asia. The governor said that improved performance in tea and horticulture, added to the sustained growth in diaspora remittances.

There has been a recovery in agricultural produce, helping drive down prices of food commodities. CBK expects that this will help mitigate the impact of rising oil prices and keep inflation within desired range.

The private sector market perception survey conducted by Monetary Policy Committee this month showed increased optimism. Respondents said that they expect public spending to increase as government implements the ‘Big four agenda.’

“However, respondents’ optimism was tempered by concerns that recent floods in many parts of the country may negatively affect crop yields,” said Njoroge.