Conflicting projections on Kenya's 2018 economic growth

Just over the past few weeks, there have been conflicting projections delivered by various authoritative bodies about the country’s 2018 economic growth rate. Of the 8 bodies that we analyzed, rates range at between 4.6% and 6.2%, a discrepancy of 200 basis points. Notably, Government agencies, the Central Bank and The Treasury seem to give higher ratings while the financial institutions give the lowest projections albeit decent.

However, one thing is clear, projections from the banks seem to be consistent except that of Standard Chartered bank that gave the lowest rating of 4.6% compared to the reported 4.7% in 2017. Another evident thing is that most of the agencies are in agreement that the rate caps have slowed credit expansion, leading to reduced private sector investment. 

On the other hand, all the institutions including the Central Bank seem to be in agreement that the Government must re-look at its appetite for debt. In fact, the central Bank Governor, recently at a post MPC briefing warned that it could be problematic if the country continues to use debt as the only option of financing mega projects. He advised the Govt to seek alternative ways of financing such projects.

Kenya 2018 GDP projections;

Stanchart 4.6%

According to Standard Chartered Bank Africa Chief Economist Razia Khan, the country”s growth in 2018 could slow to 4.6% on the back of high fuel prices, increased public debt, the effects of the 2017 general elections and other global risks.

The bank’s macroeconomic forecast is that by the end of 2018, the shilling will go up to 107.70 against the USD & still increase to 109.50 in 2019.

Central Bank of Kenya Governor 6.2%

CBK Governor Patrick Njoroge in a recent post MPC briefing said they expect a decent 6.2% growth in 2018 citing positive fiscal policy, possible review of the interest rate cap law that could strengthen the banking sector and further progress in ease of doing business.

According Njoroge, good rains should help improve agricultural yields that will lead to increase in export inflows and reduce the country’s current account balance to 5.4% in 2018.

However, he is worried that the country should expect a higher oil import bill due to rising international prices of oil.

Treasury 6.2%

IMF 5.0%

World Bank 5.5%

In its  January 2018 Global Economic Prospects report, World Bank forecasts Kenya’s economy to grow by 5.5% in 2018 up from the 4.9% growth it had projected for 2017 as inflation eases.

AFDB 5.6%

AFDB expects a growth of 5.6% driven by recent investment in infrastructure which includes SGR and the planned investment in a second runway at Jomo Kenyatta International Airport. However, AFDB warns that the Govt could struggle to meet its debt obligations because mosts of the country’s long term facilities will mature this year.

Stanbic 5.6%

According to Stanbic, historical growth recovery has been a lot more sluggish following a slowdown, but they suspect GDP growth will still expand by 5.6% y/y in 2018 driven by services sector, rebound in Tourism, better agricultural output as well as continuation in public investment in infrastructure.

Stanbic economist Jibran Qureishi said headline inflation would average 4.4 percent and is optimistic that the interest rate capping could be reviewed in the first half of the year.

Barclays 5.5%

Barclays Africa while launching its 2017/18 Sub-Saharan Africa macroeconomic report said they expect a growth of 5.5% in 2018 citing political calm and improved weather prospects as key factors that will fuel this recovery. The report further sees agriculture and tourism sectors being resilient in the year while construction will likely slow in the year.

Citi 5.6%

The American multinational investment banking and financial services corporation expects Kenya to grow at 5.6% in 2018.

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