Moody’s sees robust growth for Kenya as oil nations suffer

What you need to know:

Kenya, a net commodity importer currently benefiting from lower oil prices, is forecast to grow by at least 5.5 per cent this year against an average of 3.3 per cent for commodity exporters.
Oil and mineral exporters are having the largest declines in growth.
The report points out that economies that are diversified across various sectors will experience less adverse effects from lower demand for commodities in other parts of the globe.

Kenya is among the few sub-Saharan African (SSA) countries that will experience robust growth and maintain credit quality this year despite a major slowdown in most other parts of the region, rating agency Moody’s has said.

Kenya, a net commodity importer currently benefiting from lower oil prices, is forecast to grow by at least 5.5 per cent this year against an average of 3.3 per cent for commodity exporters.

“With the exception of Kenya, Namibia and Senegal, all rated sub-Saharan African sovereigns most of which are net commodity exporters, are experiencing a growth deceleration,” said Moody’s.

Oil and mineral exporters are having the largest declines in growth.

“Oil and commodity exporting economies such as Angola, Gabon, Ghana, Nigeria and Zambia, which grew especially rapidly prior to the commodity shock, have experienced the sharpest slowdown,” Moody’s said.

The report points out that economies that are diversified across various sectors will experience less adverse effects from lower demand for commodities in other parts of the globe. Kenya, for example, not only receives significant foreign exchange from tea, coffee, horticulture, oil re-exports, but also from remittances and foreign direct investments.

“The degree of economic diversification is emerging as an important distinguishing feature. We expect relatively diversified and less commodity dependent economies such as Cote d’Ivoire, Kenya, Mauritius, Senegal and Ethiopia to maintain robust growth momentum and stable credit quality,” said Moody’s.

On the other hand, commodity exporters are likely to face a third consecutive year of weak growth in 2016. For oil-dependent economies the slowdown has begun to affect other economic sectors.

“For oil exporting countries — Angola, Cameroon (unrated), Gabon, Nigeria, Republic of the Congo, South Sudan (unrated) and Sudan (unrated) — the initial decline in the wake of the oil price shock has now spilled over to other sectors of the economy, such as construction and services,” said Moody’s.

Moody’s noted that even the debt burden and current account deficits are rising while currencies have depreciated amid falling forex reserves.