Global economists see Kenya’s average cost of living breaching government target for two consecutive years for the first time in more than a decade on the back of elevated food prices and a weakening shilling in a net import economy.
Forecasts from 15 world-leading banks, consultancies and think tanks show inflation is likely to average 7.6 percent in 2023, unchanged from last year.
It will be the first time since 2012 that the inflation will stay above the Central Bank of Kenya’s upper target of 7.5 percent for the second year running if the projection passes.
“In 2023, inflation is expected to average at a similar pace to last year, propped up by a weaker shilling. Currency volatility and swings in food prices in response to changing weather patterns remain key risks,” analysts at Barcelona-based FocusEconomics, who compiled the data between April 18 and 23, wrote in a consensus report on Tuesday.
Kenya’s inflation — a measure of the cost of living over the last 12 months— remained unchanged at 9.2 percent in March, the highest rate in a similar month since 2017 when it hit 10.3 percent.
The rally in the cost of living at the time prompted the Treasury to allow subsidies and waiver of import duties to smoothen the purchase of key food items such as maize, rice and milk powder for several months.
The current elevated inflationary pressures amid ongoing irregular, below-average rainfall during this March-April-May main crop planting season has pushed the government to sanction duty-free importation of staple maize, rice, cooking oil, sugar, wheat and beans.
Analysts at British-owned HSBC, Europe’s largest bank by asset value, have the highest forecast on Kenya’s inflation for 2023 at 9.1 percent, followed by Standard Chartered (9.0 percent), Fitch Ratings (8.0) and market intelligence and advisory firm, FrontierView (8.0).
However, Moody’s Analytics of the US at 6.5 percent, Julius Baer (6.7), Economist Intelligence Unit (6.9), Euromonitor (7.0) and Goldman Sachs (7.3) see inflation falling below the upper target.
