Global economists have marginally upgraded Kenya’s economic growth outlook for this year, citing debt reliefs and stronger capital expenditure.
A consensus outlook from 15 global banks, consultancies and think-tanks shows that Kenya’s economy is likely to rebound from an estimated growth of 0.6 per cent to five per cent, an upward revision from 4.9 per cent a month ago.
Analysts at the Barcelona-based FocusEconomics, who compiled the outlook data between January 19 and 24, said the fresh projection is an upgrade of 0.1 percentage points from last month’s forecast.
The momentum in the economy is forecast to be sustained into next year with a consensus forecast growth of 5.4 per cent —matching the levels last seen in 2019.
“GDP is set to grow notably this year on strong private and capital spending,” analysts at FocusEconomics wrote in the outlook report on Kenya.
“Moreover, the vaccine rollout should start in February when the first doses arrive in the country, boding well for activity ahead, while debt relief should aid public finances and bolster stimulus to support the economy further” they added.
Kenya has already freed up Sh60 billion on the Sh904.70 billion that the Treasury has budgeted for debt repayment this financial year ending June 2021 after successfully applying to defer Sh32.9 billion from Paris Club creditor countries and Sh27 billion from China, Kenya’s largest bilateral lender.
The Treasury is further seeking a waiver of Sh40.6 billion under the Debt Service Suspension Initiative (DSSI) led by a group of world’s 20 major economies or G20.
“We expect modest growth in 2020, and a strong recovery in 2021 driven by agriculture, construction and manufacturing,” Central Bank of Kenya governor Patrick Njoroge said on Thursday.
“In essence, (we are past) the dark days of 2020 with the re-opening of the economy and with dynamism and momentum that is being gained in these dynamic sectors, we expect that this will push us strongly into 2021.”
Contraction in economic activity partially recovered in third quarter of 2020 to 1.1 per cent from a revised 5.5 per cent in the second quarter, helped largely by elevated agricultural production and construction works.
“The economy likely gained momentum in Q4 (fourth quarter) after seemingly recovering somewhat in Q3 (third quarter),” FocusEconomics analysts wrote.
“While the PMI (Stanbic Purchasing Manager Index) lost some ground in November–December after October’s record high, private sector employment levels continued to sequentially improve over the final months of the year, likely supporting private spending.”
Economists at UK’s Capital Economics are among the most optimistic on Kenya’s growth recovery this year with a forecast of 6.0 per cent, mirroring World Bank’s 6.0 per cent (updated in January) and slightly below Treasury’s 6.4 per cent.