Kenya’s GDP expected to grow by 5.7% in 2018

Kenya’s GDP expected to grow by 5.7% in 2018

Kenyan real Gross Domestic Product (GDP) will grow by 5.2 to 5.7 in 2018 up from the pointed growth rate of 4.7 in the first three quarters of 2017; this is according to Genghis capital economic report.

The report argues that the growth will be bolstered by re-bound in both public and private investment, positive performance in the agricultural sector and continued rebound in the service sectors.

According to Genghis capital macroeconomic senior researcher Churchill Ogutu, the heightened focus on President Uhuru Kenyatta’s big four that is food security, affordable housing, the manufacturing sector and universal affordable healthcare listed as key delivery pillars in his second-term economic plan will positively contribute to the country’s economic growth.

Ogutu said growth will be driven by rebound in both the public and private investments back in the heels of normalcy in the political environment.

“As at December 2017, Purchaser Managers Index (PMI) bounced back to expansionary level above the 50 mark as both consumption and production was lifted by the ease in the political risk,” said Ogutu.

According to him, positive performance in the agricultural sector, continued rebound in the service sector such as tourism, information and communication, protracted low private sector credit growth, public spending that is skewed towards recurrent expenditure are some of the other factors that will drive Kenya’s growth.

Ogutu said that inflation in 2017 averaged at eight percent and fired up in the first quarter of 2017 to a high of 11 percent.
“The inflation outlook of 2018 is that it will be mild in the first half period due to the base effect before ticking upwards in the second half,” said Ogutu.

He continued “Prolonged electioneering period had a negative effect on the GDP growth in 2017 with the three last quarters averaging 4.7 a decline from an average of 5.7 that was the prior prediction in the past five years.”

He added that the political heat had a major impact on the private sector which is seen on the Purchaser Managers Index (PMI) which tracks the private sector spending; it had a contraction in seven months and considering that the private sector contributes to 80 percent of the GDP, it had a negative impact on the economy as investors used the wait and see approach.

Speaking Tuesday during the Playbook launch, Elizabeth Wangechi, Head of Research, Genghis Capital said there were some positives for the Banking sector.

She cited technology as one of them, saying the sector is set to positively impact Non Funded Income (NFI), and has the ability to mobilize cheap deposits by leveraging alternate channels like agency banking and mobile platforms.