Fund managers’ poll sees domestic growth slowing down in 2016

Fund managers polled by a research firm expect the economy to grow at a slower pace this year due to lower corporate earnings and a tight monetary policy.

The poll by Nairobi-based financial research company HTM Capital, which also roped in economists, says one in every two financial experts interviewed were less optimistic of growth which is estimated to have clocked 5.4 per cent last year.

Seventeen per cent of respondents expressed optimism of a better year with a third remaining neutral.

“The private sector does not seem ready to take its role of being the key economy driver in 2016. Aggregate demand is low, the manufacturing sector is flat, payrolls are not growing in numbers and the election fever may set in early,” notes HTM Capital.

Telecommunication company Airtel joined a growing list of companies laying off staff, letting go of 60 employees over the weekend. Fifteen listed companies have already issued profit warnings, underlining a difficult year for the private sector.

Optimism was pegged on improvements in the areas of corruption, governance and infrastructure rollout as the government seeks re-election next year.

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Cytonn Investments earlier cited higher project implementation costs as a potential key economic driver this year with the government hoping to paint an image of being development conscious. Cytonn expects growth of between six and 5.5 per cent.

The World Bank estimates that the economy will expand by 5.7 per cent supported by large-scale infrastructure projects, including the expansion of the railway system and construction of a new port.

The World Bank had estimated a 6.6 per cent growth this year before lowering its expectations to 5.7 per cent. The revision was attributed to a volatile shilling, weak revenues and sluggish exports.

Experts interviewed said the shilling will be stable this year with an improving balance of payments as importation of consumption goods slows due to the higher exchange rate.

“I believe the shilling weakness overshot fundamentals, so the strengthening trend will continue in the absence of shocks,” said one of the economists surveyed by HTM Capital.

Volatility of interest rates was identified as the key risk in the money market and economic growth.

Central Bank of Kenya is expected to hold its indicative rate, CBR — currently at 11.5 per cent steady as the shilling remains stable.

Government yields have been on the rise in the last two months with the one-year bond currently attracting a return of 14.3 per cent up from 11.9 per cent at the end of November, indicative of a tight money market.