Kenya: Briefing sheet

Content Type
Country Data and Maps
Institution
Economist Intelligence Unit
Abstract
No abstract is available.
Topic
Politics, Summary, Outlook, Briefing sheet
Political Geography
Kenya

Political and economic outlook

  • Kenya's economy has grown rapidly over the past 20 years. The composition of GDP is well diversified. There is a large services sector, although the backbone of the economy remains agriculture, production of which is volatile and weather-dependent.
  • The party-political landscape is being reconfigured by horse-trading ahead of the 2022 legislative and presidential elections. The ruling party, the Jubilee Party, is likely to split as factions advocate different positions regarding a constitutional referendum.
  • Lower public investment and fiscal austerity will be a legacy of the coronavirus (Covid-19) crisis and limit economic recovery. However, a dynamic export sector will allow Kenya to return to real growth rates exceeding 5% by the latter years of the 2021-25 forecast period.
  • A wide current-account deficit and low levels of inward investment leave the country exposed to balance-of-payments stress should market access deteriorate. A recently agreed US$2.3bn IMF programme will boost market confidence and avert such a scenario.
  • Kenya will need to vaccinate most of its population to prevent coronavirus mutations and to reopen its tourism sector. Vaccinations began in March but the rollout will be limited.
  • Compared with many African countries, Kenya's economic recovery will be less reliant on commodity prices (owing to its diversification), but the country will be affected by any delays to a vaccine rollout that would curb international travel.
  • Kenya has deftly cultivated strong ties with both traditional development partners and China, underlined by a debt-service-suspension arrangement that was struck in January.
Key indicators
  2020a 2021b 2022b 2023b 2024b 2025b
Real GDP growth (%) -0.1 3.3 3.7 4.5 5.2 5.4
Consumer price inflation (av; %) 5.4c 6.0 6.3 6.2 5.8 5.6
Government balance (% of GDP)d -8.1 -8.8 -7.3 -6.1 -5.1 -4.4
Current-account balance (% of GDP) -4.8 -5.7 -5.6 -5.3 -5.0 -4.5
Money market rate (av; %) 6.9c 6.8 6.9 6.8 7.0 7.2
Exchange rate KSh:US$ (av) 106.5c 109.1 114.5 118.9 122.0 124.2
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual. d Fiscal years (ending June 30th).

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Key changes since March 16th

  • Higher remittances inflows in the first quarter of 2021 have given the shilling some support. An expected widening of the current-account deficit is expected to cause depreciation in 2021, but The Economist Intelligence Unit's forecast for this has been upgraded from an annual average of KSh110.6:US$1 in that year to KSh109.1:US$1.

The month ahead

  • May 26th-Monetary policy committee meeting of the Central Bank of Kenya (CBK): As inflation is firmly within range, recently assisted by slight currency appreciation, and with the current monetary stance succeeding in meeting the CBK's credit growth objectives, the policy rate is likely to be kept at 7%.

Major risks to our forecast

Scenarios, Q1 2021 Probability Impact Intensity
Foreign companies and tourists are affected by terrorist acts High Very high 20
The coronavirus (Covid-19) pandemic prolongs a recession into 2021 High Very high 20
A lack of unity undermines the effectiveness of the government High High 16
Basic infrastructure suffers from poor management and lack of investment High High 16
Business transactions are undermined by endemic corruption High High 16
Note. Scenarios and scores are taken from our Risk Briefing product. Risk scenarios are potential developments that might substantially change the business operating environment over the coming two years. Risk intensity is a product of probability and impact, on a 25-point scale.
Source: The Economist Intelligence Unit.

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