The free fall of Kenya Shilling against the dollar and major currencies is expected to continue for the better part of 2024, however according to experts the depreciation will be to a lesser extent.
- According to Sanlam Investment Outlook for 2024, availability of forex is also expected to pose a challenge this year.
- Other factors that will play center stage in 2024 include geopolitics, elections, and fiscal & monetary policy reforms.
- Globally, the analysts expect economic conditions to improve as global monetary policy becomes more accommodative.
“We expect the shilling to depreciate in 2024 but face less pressure than 2023 as the Central Bank of Kenya has increased interest rates and US interest rates are projected to decline,” Sanlam’s Deputy Chief Investment Officer, Dan Gathogo noted in the report.
“As uncertainties around Kenya’s repayment of its 2024 Eurobond ease, coupled with less restrictive monetary policy globally, this could see improved sentiment from foreign investors towards Kenyan Equities trading at historically low valuations,” he noted, “On Real Estate, the continued weakening shilling and higher interest rates could slow construction activities in the medium term. However, rental assets in defensive sectors such as education and health could still enjoy rental escalation despite inflationary pressures.”
Gathogo noted that interest rates on Kenyan government securities rose sharply in 2023, adding that he expects interest rates to remain elevated in 2024 driven by the increase of the Central Bank rate in December 2023, the funding requirements of the government, and a lag in tax collection.
Global Outlook
“Global equity markets performed strongly with developed equity markets increasing 21.8 per cent in 2023, and emerging markets by 7 per cent,” noted Shritesh Nanji, Sanlam Chief Investment Officer, “Global GDP growth projections for 2024 are expected to be broadly similar to 2023 at 3 per cent, with Sub-Saharan Africa growth expected to pick up from 3.3 per cent to 4.0 per cent. Conditions for Africa are improving with countries receiving additional support from international agencies like the IMF and World Bank.”
“We expect the external funding environment to improve, for example, Ivory Coast is looking to issue the first Eurobond in Africa in around 2 years. Valuations are attractive with equities trading significantly below historic averages. Catalysts to improve returns will include investor confidence in foreign currency availability and fewer concerns regarding Africa debt sustainability,” Nanji added.
Kenya Shilling Weakens Past 160 Against US Dollar (kenyanwallstreet.com)
