DROP

Poor rainfall, trade tension cuts Kenya's economy to 5.6 in first half of 2019

In Summary
  • Apart from a drop on the economic growth, the country's current account balance rose marginally to 4.3 per cent in November
  • In September, Kenya’s National Treasury said the economy was expected to grow by six per cent this year.
CBK Governor Patrick Njoroge.
CBK Governor Patrick Njoroge.
Image: FILE

Kenya's economy shrunk to 5.6 per cent in the first half compared to 6.4 per cent same period last year on delayed rainfall and global trade tension.

In his post Monetary Policy Committee (MPC) press briefing, Central Bank governor Patrick Njoroge said effects of delayed onset and below average rainfall affected agriculture.

He also cited continued uncertainties rising from trade tension between US and China, Brexit and geopolitical development that has forced central banks world over to implement accommodative monetary policies to support growth and financial stability.

 

He however expects the economy to rebound in the remaining half of the year on good agricultural productivity supported by ongoing rainfall and sound monetary policies that are expected to support small and medium enterprise growth.

''The 2019/20 economic growth is well anchored and we expect it to hit 5.9 per cent which is more same to a projection of six per cent,'' Njoroge said.

Central Bank's comment of the country's economy mirrors that of international bodies like the World Bank and the International Monetary Fund (IMF) which downgraded the country's economic growth to 5.8 and 5.8 per cent in April and October respectively.

In September, Kenya’s National Treasury said the economy was expected to grow by six per cent this year.

The MPC Market Perception Survey shows bankers are optimistic about the country's economic prospects. There optimism rate surged to 92.3 per cent in November compared to 87.5 per cent in September.

The optimism is attributed to among other factors, improved weather conditions, payments of pending bills by the government, growth in lending to MSMEs following the repeal of interest cap law and ongoing public investment in infrastructure.

Even so, there was reduced optimis among non bank sector chiefs from 73 per cent in September to 64.8 per cent this month.

 

Apart from a drop on the economic growth, the country's current account balance rose marginally to 4.3 per cent in November from an all time low a five year low of 4.1 per cent in September on reduced value of exports and higher import of petroleum products.

''We continue to receive low value on our agricultural exports due to competition in the global market especially tea. This saw the current account balance widen marginally by 20 basis points in November,'' Njoroge said.

Diaspora remittance inflow remained strong supported mainly by reduced costs as banks leveraged on technology.