- Kenya’s economy to grow at 1.5% in 2020
Renaissance Capital, a leading emerging and frontier markets investment bank, says the East African economy is expected to lead the Sub-Saharan Africa region in post-COVID-19 recovery.
Yvonne Mhango, Renaissance Capital, Sub-Saharan Economist, speaking at the 6th Annual Virtual East Africa Investor Conference, said “We expect the East African region to lead the recovery in Sub-Saharan Africa,” adding that “We expect the economies to be among the first to emerge from this crisis.”
According to Mhango, East Africa scores high in terms of resilience largely being attributed to key sectors, agriculture, tourism, global trade, and remittances.
For instance, Kenya had a ‘good start to the year with its 1Q20 growth stronger than expected despite a drop in tourism numbers in March. “All of Kenya’s economic sectors saw growth in 1Q20, except for accommodation and restaurants,” said Mhango.
“We forecast growth of 1.5 percent in 2020 in large part due to agriculture,” she said. The sector was the largest contributor to growth in the quarter with a year on year growth of 4.9 percent in 1Q20 from 3.9 percent in 1Q19 due to favorable rains.
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The Economist further stated that the low inflation has allowed for an accommodative stance and thus expects the Central Bank’s Monetary Policy Committee to keep it within the 2.5-7.5 percent range.
“We expect no further rate cuts in 2020 which is positive for the overvalued shilling,” said Mhango. She adds that horticulture exports have increased by 7 percent in April and in mid-May accounting for two-thirds of exports to help in supporting the local currency.
However, when it comes to the domestic market, they expect domestic borrowing to fall by 10 percent in the current fiscal year. “This implies a wider deficit of 8.5-9.0 percent and 8.5 percent of GDP in FY19/20 and FY20/21 respectively.”
Sheila M’mbijjewe, Deputy Governor Central Bank of Kenya acknowledged that the country began the year with strong economic fundamentals, “As Covid-19 came we had a position that was fairly strong with some buffers,” she disclosed during a panel discussion.
“There are good signs of recovery, these are visible. These are all positive, but the uncertainty remains,” she said.
Speaking on the same panel, Tobias Rasmussen, the IMF’s resident representative for Kenya said they will revise upwards the country’s GDP forecast.
“We have seen an upturn in most activity indicators…Looking at the numbers coming out of Kenya it’s fair to say that the outruns here have so far been better than what we at the IMF expected,” he said.
Across East Africa, good rains have helped keep inflation low in Tanzania compared to Rwanda and Uganda whose inflation levels picked up.
“East Africa may be one of the beneficiaries of lower oil prices, remittance has helped up relatively well and exports too,” said Charles Robertson, Global Chief Economist Renaissance Capital.