A study by Exotix Capital has discovered that despite the extended election period, Kenya’s gross domestic product (GDP) remained strong in 2017. The study report expects GDP growth to be much stronger in 2018, with the possibility of increasing to higher levels over the medium term.
The report is positive about increased GDP growth in 2018 because the election period, which subdued economic growth, is now over. Furthermore, better weather patterns are expected while continued large-scale infrastructure expenditure will increase GDP growth.
However, Exotix is more pessimistic than International Monetary Fund’s (IMF’s) World Economic Outlook projections and Bloomberg’s consensus because “we believe election-related issues have continued to hamper growth throughout Q1 18 and higher levels of debt service payments going forward will limit the amount of government expenditure, leading to economic stimulus rather than simply covering financing costs.”
Kenya’s Inflation Rate
January’s y/y consumer price index (CPI) of 4.83 percent shows the first increase since August. The increase is caused by increased food and fuel prices, including the end of the maize subsidy. Despite the increase, Kenya has undergone a steadily declining trend and remains safely within the Central Bank of Kenya’s inflation limit of 5 ± 2.5%.
Exotix is also more pessimistic about inflation than IMF and Bloomberg. According to the report, Exotix expects inflation to increase throughout the year to c5.6 percent, prior to rising to 5.8 percent over the medium term.