How Kenya's economy looks for 2016

by Tendai Dube 0

The year 2015 was marked by volatility in Kenya’s macro-economic space, especially the forex market and inflation. The year also saw various economists such as World Bank and the IMF downgrade their growth forecast for the Kenyan economy.

Development Economist Anzetse Were, recapped the year that was and where trends were looking rocky, she also gave some insight into what 2016 could have in store for Kenya’s economy.

“It was just a tumultuous year for Kenya in 2015 and towards the last half of the year, Kenyan government was getting a lot of negative attention and I think people had assumed that everything was going to be fine,” said Were.

However that was not the case she says, as surprise factors such as El Nino, negatively impacted the weather and the country.

“I think the lesson that I learned in 2015 is that there needs to be a consideration of factors that are not necessarily considered,” she adds.

But 2015 was not all negative Were explains.

“The last quarter of last year, we grew quite well at about 5.8 per cent, so we are hoping that we will be able to keep that momentum into 2016 and then we will see where we go from there.”

She believes that fiscal policy and monetary policy are very important in informing the type of growth that will happen for Kenya.

“Another factor that I think constrained development last year, were the interest rates, there was a time when government was willing to borrow at as high as over 20 per cent and so that gave some signalling to domestic markets that they can hike up interest rates,” Were said.

She also speaks on the depreciation of the Kenyan Shilling as another factor, and was juxtaposed with the strengthening of the US dollar.

“The fact that we are racking up a lot of foreign denominated debt, meant that government hawk-eyed around managing the Kenyan Shilling depreciation,” she said.

She adds: “There were other external factors that pushed up interest rates in order to control the value of the shilling so that it does not become unsustainable and so that we try and keep check on the import bills.”

In December Were notes, inflation went above the government’s limit of 7.5 per cent and stood at about 8 per cent.

“So there may be action this year or this quarter around government taking action to get inflation back down,” she said.

“There is going to be an interesting dance going on that the CBK (Central Bank of Kenya) is going to have to manage around managing inflation without necessarily falling back on the interest rate and pushing rates up even higher.”