The International Monetary Fund(IMF) projects that Kenya’s inflation rate will hit a high of 7.2 per cent in 2022.
Further, the multilateral lender expects the cost pain to remain over the medium term, with inflation projected at 7.1 per cent in 2023.
These projections are contained in the IMF April 2022 World Economic Outlook (WEO) report.
At the same time, the IMF has left Kenya’s GDP projection at 5.7 per cent and a lower 4.6 per cent in 2023.
Globally, the IMF expects growth to slow down to 3.6 per cent in 2022 from an estimated 6.1 per cent last year as the Russia-Ukraine war slows down economic recovery after COVID-19 shocks.
For the Sub-Saharan region, the impact of the Russia-Ukraine war is expected to be manifested in higher food prices.
“Higher food prices will hurt consumers’ purchasing power-particularly among low-income households- and weigh on domestic demand,” noted the IMF.
Presently, inflation in Kenya stands at 5.6 per cent as of March 2021 but is set to spike at the end of April on costlier fuel and certain food commodities such as wheat, maize flour and milk.
The current cost of living is the highest since December 2021, when inflation stood at 5.7 per cent.
The higher fuel prices are expected to widen the gap in Kenya’s trade balance, underlining costlier imports, with the IMF projecting the current account deficit at 5.8 per cent of GDP by the close of the year from 5.4 per cent in 2021.
However, the higher inflation view holds within the Central Bank of Kenya (CBK) target band of between 2.5 and 7.5 per cent.
On a global scale, the war in Ukraine has triggered a costly humanitarian crisis that could become overwhelming without a swift and peaceful resolution.
The IMF report projects global growth to slow significantly in 2022, mainly due to the war.
The economic costs of war are expected to spread farther afield through commodity markets, trade, and—to a lesser extent—financial interlinkages.
Fuel and food price rises already have a global impact, with the most affected vulnerable populations in low—income countries.
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