Kenya is expected to grow at 6.4 per cent in 2021 but economic growth could decelerate next year to 6.0 per cent, according to the Central Bank.
The forecast is higher than the 6.1 per cent growth for this year and 5.6 per cent in 2022 projected in September.
“We have used this new quarterly data, leading economic indicators and other information that we have and our projection for 2021, the annual is 6.4 per cent and six per cent in 2022,” Dr Patrick Njoroge said during a virtual media briefing post MPC meeting held Monday.
However, the CBK said they need more data for 2022 and this will largely be informed by the country’s Q3 data expected in December.
“We still need to refine them a little bit more particularly 2022 but on the whole, these are the numbers we have been able to put together,” said Dr Njoroge.
The key risk to its revised projection of 6.4 per cent GDP growth is a potential new Covid-19 variant which was not factored in the estimates.
In addition, the growth will be subdued by the impact of drought on the agricultural sector. The sector is projected to drop by 0.6 per cent.
“There is a lot that is happening and largely related to climate change/weather. 2020 was a bumper year..the sector is normalising. As a result, there will be a slight reduction in growth in the sector,” Dr Njoroge said.
Dr Njoroge said based on the recently released GDP data that indicated the Kenyan economy rebounded strongly in the first half of 2021, “Leading economic indicators point to a continuing recovery in the second half of 2021 also boosted by the full reopening of the economy.”
“This reflects the strong recovery of the services sector particularly in transport and storage, education, information and communication, wholesale and retail trade, and the improved performance of the construction and manufacturing sectors.”
The services sector is projected to register a 10.4 per cent growth rate ahead of industry at 5.6 per cent., education (33 per cent), ICT (19 per cent) and health at 9.3 per cent.
CBK explained that its projections are based on its Composite Index of Economic Activity (CIEA) which remain generally aligned to past real GDP outcomes.
The revised projections are in contrast to 5.80 per cent according to toNCBA Regional Economic Outlook Report released Monday.
This is also an upward revision to the bank’s initial baseline estimate of 5.3 per cent in May 2021 which is supported by a better-than-expected evolution of the public health crisis that continues to support quicker softening of mobility restrictions.
NCBA projects GDP growth to remain above trend at 5.2 per cent in 2022 driven by the continued release of earlier pent-up demand.
According to the report, trade, real estate, health care and financial services are all expected to revert to historical growth trends. Manufacturing could also emerge stronger as companies rebuild inventory in response to growing demand.
Disruptions to agriculture from the pandemic, NCBA noted, has been moderate although harsh weather could keep growth below the historical average.
Economic growth sensitivity to agriculture has waned after the recent rebasing of the economy. The sector now contributes about 23 per cent to Gross Domestic Product (GDP), a marked decline from 33 per cent, prior to rebasing.