The United Kingdom’s economic growth is expected to slow down to 1.4 percent in 2018 and to 1.1 percent in 2019 according to an economic forecast by the European Commission. The forecast also predicts that inflation could constrain incomes as uncertainty surrounding Brexit negotiations negatively affects business investments.
The Capital Market’s Authority (CMA), in its soundness report for Q1 2018, is of the opinion this could affect Kenya which exports goods such as tea and coffee to the UK. Exports to the UK are expected to drop due to the decreased consumer and fiscal spending. The UK has been one of Kenya’s leading trading partners, although that is beginning to change.
A 2017 Economic Survey by KNBS shows that exports to the UK declined from 7.6 percent to 6.5 percent of the country’s total exports at the end of 2016. Imports from the UK also declined for the third consecutive year, dropping from 2.72 percent in 2015 to 2.34 percent in 2016.
On the other hand, imports from China stood at 23.57 percent of Kenya’s total imports at the end of 2016 making Kenya the leading destination of imports from China.
“The market share of trade with [the] UK is likely to further shrink with slowed economic growth. Against this backdrop the re-negotiation of post-Brexit trade deals should focus on devising new ways to maintain the current market share while identifying new avenues to expand trade,” states CMA’s report.
The Eurozone Economy
The CMA report also assesses the Eurozone economy, observing that the predicted slow growth could affect the EAC/EU Economic Partnership Agreement (EPA). The EU is the East African Community’s (EAC) largest trade partner with 25.3 percent of exports from the EAC going to the EU and 12.5 percent of EAC imports coming from the EU.
CMA recommends that Kenya should assess and diversify its trade partnerships to prevent any impact from decreased trade with the EU. Moreover, the Authority proposes a focus on intra-African trade via the African Continental Free Trade Area (AfCFTA) agreement signed in March this year.
