In its April meeting held on Wednesday, Kenya’s Central Bank MPC lowered the CBR from 7.25% to 7%, the lowest level in 9 years.
The Kenyan Wallstreet team will be sharing highlights of Governor Patrick Njoroge’s post-MPC briefing. This MPC meeting was special seeing that the meeting occurs bi-monthly but this one occurs barely a month since the last meeting on the back of significant developments globally in terms of evolution and containment of coronavirus.
Dr. Njoroge begins the teleconference by saying that new economic data has been released since the last MPC meeting on March 23 pertaining to the effects of coronavirus pandemic. For instance, the IMF says that the global economy is already in recession and expects a significant contraction of -3% in 2020. Further, data released in mid-April reveals that advanced economies will contract by 6.1% with emerging markets and developing economies (EMDEs) forecast to contract by 1%. Dr. Njoroge terms this as synchronized drowning as both emerging markets and advanced economies are both contracting or in recession. The US economy will contract by 5.9%, Germany 7%, Sub-Saharan Africa 1.6%, with China having a modest growth of 1.2%. Analysts remain concerned about the health of the global economy. Njoroge says that US Q1:020 GDP figures revealed that a contraction of 4.8% for the first time since 2008 and things could get worse in Q2:020. Furthermore, COVID19 has hammered US labor markets leading to a record 26 million unemployment claims in under five weeks or 16% of their labor force. Dr. Njoroge also mentioned the volatility in the oil market that saw WTI crude futures falling into the negative zone due to low demand and lack of storage space. “The benchmark Murban is at $18.4 per barrel compared to an average of $73.1 a barrel in April 2019,” says the governor.
On the domestic front, there has been some new data since the last MPC meeting in March.
Kenya GDP 2019
Kenya National Bureau of Statistics (KNBS) data shows that Kenya’s GDP grew by 5.4% in 2019 compared to 6.3% growth recorded in 2018. Dismal performances from agriculture below a five-year average due to delayed rain and insufficient rainfall weighed down economic growth. From Q2:019-Q4:019, CBK had been revising agricultural growth downwards. Similarly, the industrial sector was sluggish in 2019 despite a very strong construction sector. In 2019, the services sector was strong growing at 6.9% surpassing CBK’s growth estimates of 6.5%. Dr. Njoroge opines that the economic figures are satisfactory albeit not as strong as 2018 figures.
Kenya outlook 2020
Therefore, looking into the global economic data such as IMF April numbers and KNBS data, the MPC projected average overall growth of 2.3% in 2020. However, this was a lower revision from earlier projections in January of 6.3% and March 3.1%. Accommodation and restaurants will perform terribly contracting by 50% owing to the lockdown and social distancing measures. Moreover, CBK forecasts that transport and communication will contract 10%, and agriculture by 2%. Some sectors stand to benefit and will expand as the year progresses. For instance, information and technology (ICT) will expand 5% in 2020 as more people resort to remote working during up demand for communication devices. The health sector will expand by 3%. Dr.Njoroge says that the economic rebound is expected to record a 6.1% growth in 2021.
