Kenya's economy likely to expand by 3.1% this year - central bank

Kenya’s economy is likely to grow by 3.1% this year, the central bank governor said on Wednesday, reflecting growing optimism in the East African nation as it navigates its way through the coronavirus crisis.

Patrick Njoroge’s forecast is by far the most optimistic, with the ministry of finance expecting growth of potentially less than 2.5%, and the International Monetary Fund projecting a contraction of -0.27% for the year.

“We are in a transition towards post-COVID,” the governor told an online news conference, adding that the bank’s forecast for this year has a wide margin of error due to lingering uncertainties caused by the pandemic.

His comments come a day after President Uhuru Kenyatta started the gradual re-opening of the economy, saying the COVID-19 infection curve had started to flatten.

Policymakers held the benchmark lending rate at 7.0% for the fourth time in a row on Tuesday, saying that some fiscal stimulus measures, unveiled when the pandemic struck, were yet to be transmitted through the economy.

The accommodative stance will continue, Njoroge said.

“We will hold onto this policy and when there is new data we will act accordingly,” he said.

Policymakers cut the policy rates by a total of 125 basis points in March and April, and market participants say any moves to raise them back up again will boost the shilling currency 

This year’s projected economic growth will be supported by robust expansion in the farming and information technology sectors, as well as a recovery in the amount of cash sent home by cash sent by Kenyans living abroad, Njoroge said.

“We are benefiting from the rather favourable weather conditions,” he said, citing production of food crops and buoyant tea exports.

He however warned that the critical accommodation and restaurants sector, which covers tourism, is expected to contract by -40% this year.

“This is the soft spot,” he said. “The recovery of that will be contingent on the recovery of international travel.”

Source: Reuters