• This is despite strong activities expected in the services sector, sustained performance in agriculture, and improved exports.
• CBK’s projection is however higher than that of World Bank, which has forecast a slowdown to five per cent this year.
Image: EZEKIEL AMING'A
The country’s economy is projected to grow at 5.4 per cent in 2024, Central Bank of Kenya now says, a slowdown compared to the 5.6 per cent recorded last year.
This is despite strong activities expected in the services sector, sustained performance in agriculture, and improved exports.
Impact from risks including geopolitical tensions, mainly the Russia-Ukraine war, Israel-Palestine conflict and the Red Sea attacks on vessels by the Houthi Rebels are among the biggest concerns, with experts warning they will impact global economies.
“The main risks to the global growth outlook relate to further escalation of geopolitical tensions, interest rates remaining higher-for-even-longer in advanced economies, and policy uncertainty attributed to changes of government in some major economies,” governor Kamau Thugge said in his post-Monetary Policy Committee statement.
The CEOs Survey and Market Perceptions Survey which were conducted ahead of this week’s MPC meeting however revealed sustained optimism about business activity and economic growth prospects for the next 12 months.
According to CBK, the optimism was primarily attributed to the stable macroeconomic environment reflected in the low inflation rate and stability in the exchange rate, and the continued strong performance of agriculture.
“Nevertheless, respondents expressed concerns about the impact of the recent protests on economic activities, high cost of doing business, and potential impact of increased geopolitical tensions on the economy,” Thugge said.
The recently released GDP data for the first quarter of 2024 showed real GDP growth by five per cent, pegged on continued strong performance in agriculture attributed to favourable weather conditions, and robust performance of the services sector, particularly wholesale and retail trade, accommodation and food services, financial and insurance, information and communication, and real estate.
Nevertheless, growth of the industrial sector, particularly manufacturing and construction, slowed down.
CBK’s projection is ,however, higher than that of World Bank, which has forecast a slowdown to five per cent this year.
According to the 29th edition of the Kenya Economic Update, ongoing fiscal consolidation efforts and tight monetary policy are expected to slow down GDP this year.
Even so, there is an expected increase in investment based on restored access to international capital markets.
This, World Bank says, will spur investor confidence and capital inflows, as well as more credit to the private sector through reduced domestic government borrowing.
Other growth drivers include the recovery in agriculture and tourism as well as deeper regional integration, with the economy expected to further grow by at least 5.2 per cent in 2025-26, World Bank says in its latest Africa’s Pulse report.
Kenya’s National Treasury had projected a growth of 6.3 per cent this year, even as the country navigates through a high interest rates regime and major global risks.