Kenyan Economy Expected to Grow Between 5.3% and 5.5% in 2018

The real estate company, Cytonn Investments Limited has released the 2018 Market Outlook Report that shows how the year 2017 was and projects the growth in 2018.

According to the report, Kenya’s economy is expected to grow between 5.3 and 5.5 percent driven by:

• Recovery of the agricultural sector, following improved weather conditions,
• Continued strong growth in the real estate and tourism sectors, with growth in the real estate sector being supported by improved infrastructure and a growing middle class,
• Public infrastructural investments, such as the second phase of the SGR and LAPSSET, boosting growth in the construction sector, and,
• Growth in the manufacturing sector driven by the Kenyan Government’s initiatives, like reducing the cost of energy, aimed towards supporting the various industries, such as textile, leather, and agro-business.

“We expect the government to focus on restoring normalcy in the operating environment and fully regaining investor confidence following the political uncertainty experienced in 2017, an election year. This, we expect to be fulfilled through continued implementation of the 2017/18 budget that focused on job creation, investments into the country through tax incentives, and improvement of living standards of the low-income population through an increase in the lowest monthly taxable income to 13,489 shillings from 11,135 shillings,” stated the report.

In 2017, the Kenyan economy remained resilient, despite a challenging operating environment, expanding by an average of 4.7 percent for the first three quarters of 2017, compared to an average of 5.7 percent in a similar period in 2016.

The Kenya National Treasury, World Bank, and IMF cut their 2017 GDP growth projections to 5.5, 4.9 and 5.0 percent respectively from 6.0, 6.0 and 5.7 percent respectively at the beginning of the year citing:

• Slower growth of the agriculture sector, which grew by an average of 1.9 percent in the first three quarters of 2017 compared to an average of 5.0 percent in a similar period in 2016, following the prolonged 2016/17 drought
• The interest rate cap, which led to a reduction in corporate earnings for commercial banks with EPS growth for Q3’2017 at negative 8.2 percent, compared to positive 15.1 percent in Q3’2016
• Political uncertainty during the year
• Low private sector credit growth, which has averaged 2.4 percent in the first 10-months in October 2017 compared to a 5-year average of 14.4 percent.

According to the report, the government exceeded the first quarter of the FY’2017/18 spending targets for both recurrent and development expenditure at 102.4 percent and 102.9 percent absorption rates, respectively.