LAST year's economic growth may after all not have been as low as earlier forecast with Cytonn Investments upgrading its estimates to 5.3-5.7 per cent from 4.7-4.9 per cent.
The firm's revision based on official growth of 5.8 per cent in the third quarter, means all estimates are now pointing to a growth of more than five per cent in the national wealth compared to 2014.
Cytonn said in a weekly report released on Sunday evening the provisional growth data for July to September, from the Kenya National Bureau of Statistics, overshot its earlier projection of 4.9 per cent.
KNBS reported on December 30 expansion in the gross domestic product was driven by an increase in activities in construction, mining and quarrying, electricity supply, financial services and the dominant agriculture sectors by 14.1, 12.5, 11, 10.1 and 7.1 per cent,respectively.
Cytonn analysts said their growth forecast of five per cent in mining and 5.5 per cent in financial intermediation and a drop of three per cent in manufacturing “were off” the official growth figures of 12.5, 2.8 and 10.1 per cent for the respective sectors.
The depreciation of the shilling by 12.9 per cent against the dollar, a higher interest regime, weaker income tax revenues and, corruption and mismanagement of public funds were major dampers of growth last year.
“Despite the challenges the economy has remained resilient… [and] GDP growth will most likely surpass our previous growth,” the analysts at Cytonn said.
Inflation in December breached the target of between 2.5 and 7.5 per cent for the first time since August, 2013 on rise in the cost of soft drinks, water, alcohol and as cigarettes. This followed enforcement of the Excise Duty Act on December 1.
“We are of the view that inflation will remain above the upper bound given the rising oil prices and the hesitation by the CBK to raise rates to stem inflation, as ...[this] will be detrimental to the economy,” Cytonn said.
Its revised growth estimate for 2015 is now closer to the 5.6 per cent consensus by 11 global firms analysed by Barcelona-based FocusEconomics.
The International Monetary Fund expects growth in 2015 to be 5.6 per cent while its sister company, the World Bank, has put it at 5.4 per cent.
The rise of dollar reserves to 4.6 months of import cover after the acquisition of $600 million [Sh61.38 billion] international syndicated loan on October 29, and sacking of top public officials mentioned in corrupt deals on November 24 will most likely boost growth this year, Cytonn said.
“Kenya’s economy is set to accelerate slightly in 2016, sustained by loose fiscal policy, infrastructure projects and robust private consumption,” FocusEconomics said in its report for January, 2016. “Nevertheless, a large fiscal deficit and rising public debt, a weak shilling and tight monetary policy represent challenges for the economy, along with corruption and insecurity.”