MARKETS • Kenya's Current Account Deficit Narrows to 4.6% in February • Khusoko

Central Bank projects current account deficit at 5.2 per cent of GDP in 2021

Kenya’s current account deficit narrowed to 4.6 per cent of gross domestic product (GDP) in the 12 months to February 2021, attributed to savings from oil imports and resilient earnings from exports and remittances.

This was a marginal improvement of one percentage point from November’s deficit of 4.7 per cent.

“Provisional data on the balance of payments shows that the current account deficit narrowed to 4.6 per cent of GDP in the 12 months to February 2021 compared to 5.8 per cent of GDP in the 12 months to February 2020,” Central Bank of Kenya (CBK) said in its weekly bulletin.

The Central Bank says the current account deficit is projected at 5.2 per cent of GDP in 2021, from an estimate of 4.8 per cent of GDP in 2020, reflecting an expected pickup in imports of intermediate goods.

“Exports are projected to improve due to the vaccination efforts globally which are expected to ease COVID-19 related restrictions and lead to a pickup in demand. Kenya’s new trade arrangement with the UK is a welcome development to support trade,” the Central bank said Monday.

In the monetary committee policy held on March 29, the CBK said exports of goods have remained strong, growing by 1.2 per cent in the 12 months to February compared to a similar period in 2020.

Receipts from tea and horticulture exports rose by 8.1 per cent and 3.4 per cent respectively, in the 12 months to February 2021 compared to a similar period in 2020, mainly reflecting increased demand from the key international markets.

Imports of goods declined by 11.8 per cent in the 12 months to February 2021 compared to a similar period in 2021, mainly reflecting lower imports of oil products due to relatively low international oil prices.

Receipts from services exports remained subdued, reflecting weaknesses in international travel and transport.

Remittances remained strong at USD260.3 million in February 2021, and at USD3,155 million were 11.4 per cent higher in the 12 months to February 2021 compared to a similar period in 2020.