Economic Prospects Greater This Year Than During 2017 Elections: CBK

 

By Kepha Muiruri

Optimism about Kenya’s economic prospects in the next 12 months is greater this year compared to the levels of optimism marked before the 2017 General Election.

A comparison of market perceptions data by the Central Bank of Kenya (CBK) shows the levels of optimism by banks have grown from just 21 per cent in 2017 to 79 per cent in July 2022.

Optimism among non-bank private sector players has meanwhile grown from 35 per cent to 72 per cent in the same period.

“This in effect shows how people are proceeding with making economic decisions. Last time, there was a lot of wait-and-see attitudes in terms of decisions,” CBK Governor Patrick Njoroge said on Thursday.

“This time, we haven’t had much of this wait-and-see attitude, the economy is still going on despite what many had thought would be problematic. I think this is a phenomenal outcome.”

Queried on the reasons for the change in expectations, the CBK said it was yet to fully pin-point an attribution for the winds of change.

“I don’t have an answer on why this is the case, but I do have a hunch on what it could be,” added Dr. Njoroge.

CBK’s Monetary Policy Committee (MPC) survey on CEO optimism on economic prospects however provides clues to the elevated levels of optimism.

The Chief Executive Officers for instance listed the continued post-pandemic recovery, the expectation of a return to normal operations upon the conclusion of the elections, increased government expenditure on infrastructure and sector-specific growth opportunities.

Nevertheless, the CEOs list high inflation, declining consumer demand and the impact of the war in Ukraine on consumer prices.

Subsequent to the data check on economic growth expectations, the CBK has only slightly revised its 2022 growth projection to 5.4 per cent as it holds out for a strong output to economic activity this year.

The projection contrasts differently with the projection of 5.7 per cent GDP growth by the International Monetary Fund (IMF).

The IMF however expects the rate of inflation to stay above CBK's upper target of 7.5 per cent in the short-run before easing to 7.3 per cent in December 2022.

On Wednesday, the CBK retained its benchmark interest rate at 7.5 per cent stating inflation expectations remained anchored on government subsidies to check food and fuel prices and ease to global commodity prices.