CBK study shows jump in optimism on economic growth

More than 60 per cent of Kenya’s banks and non-banking firms expect the economy to expand by more than five per cent as the cost of goods and services continue to drop and the currency maintains stability.

A Central Bank of Kenya (CBK) study shows that half of the commercial banks surveyed expect the economy to grow by between five and 5.3 per cent.

Another 6.2 per cent say the economy would grow between 5.4 and six per cent while 3.1 per cent forecast an expansion of more than six per cent.

The Monetary Policy Committee (MPC) survey shows that 41 per cent of the non-bank firms expect the economy to expand by between five and 5.3 per cent.

About 23 per cent predict growth of between 5.4 and six per cent while four per cent project an expansion of more than six per cent.

“Growth is expected to pick up and average five to 5.3 per cent mainly due to improved economic environment with lower inflation and exchange rate stability and large investment in infrastructure,” said the banking regulator in the latest perception survey.

CBK added that it was expecting credit growth to pick up going forward and regional trade within East Africa Community countries to expand faster this year.

Last month, the Kenya National Bureau of Statistics said that the country’s economy had slowed to 3.5 per cent in the first quarter 2012 compared to 5.1 per cent in the first quarter of last year when higher inflation rates, high interest rates and delays in the onset of the long rains plagued the economy.

High international oil prices were blamed for the rise in the cost of basic goods and services while the high interest rates were mainly due to the tightening of the monetary policy by the banking regulator.

The agriculture sector suffered from severe frost in January, which affected tea and horticulture sub-sectors, while the delay of the onset of long rains also played a part in keeping food prices up.

Jonathan Ciano, the chief executive officer Uchumi Supermarkets, said that good rains have helped push down inflationary pressures, bringing with it optimism that consumers will be paying less for basic goods and services.

The perception survey shows that 80 per cent of the commercial banks and 52 per cent of the non-bank firms expect the cost of living to decline further.

In November last year, the general cost of living peaked at a high of 19.72 per cent after going up for 14 months from a low of 3.21 per cent in September 2010.

In June this year, the cost of basic goods and services fell to 10.05 per cent due to tight monetary policy stance, a drop in global fuel prices and improved rains that have brought down the general cost of basic foods.

Mr Ciano said that optimism on the economic growth was also being driven by sentiment that the coming elections may not be affected by International Criminal Court cases against two politicians, a radio journalist and former head of the civil service.