Another inflation dampener in 2024 will be a slower pace of shilling depreciation.
The world’s leading banks, consultancies, and think tanks have marginally raised
Kenya’s growth prospects, citing increased private sector expenditure in an economy where inflationary pressures remain elevated.A consensus forecast from 14 global firms shows the gross domestic product (GDP) — a measure of all economic activities by the government, companies, and individuals — will likely grow at 5.2 percent in 2024.
This is a paltry 0.1 percentage point from last month’s forecast, signalling slowing inflation pressures.
The growth is, nonetheless, projected to largely remain flat from last year’s, estimated at 5.1 percent.
Read: Global economists see faster increase in Kenya's inflation
“GDP growth in 2024 is anticipated to remain at the levels expected in 2023, primarily propelled by a stronger expansion in private spending. Conversely, growth in both investment and government spending is expected to decelerate,” analysts at Barcelona-based FocusEconomics, the macroeconomic research firm that compiled growth outlooks, wrote in the February consensus forecast report.
The GDP measure largely focuses on the total value of goods and services produced, the value of goods and services bought, and income generated from mainly profit and salaries.
The measure does not, however, capture the value of unpaid work and does not also show how income generated is split amongst the population.
As such, a growth in GDP may result in the rich getting richer and the poor getting poorer, economists say.
The consensus forecast suggests this year’s growth will likely be the highest in three years, albeit at a marginal expansion compared with estimated 2023’s. Kenya’s growth forecast is higher than sub-Saharan’s average of 3.8 percent, ranking seventh among major economies in the region. The growth outlook trails Ethiopia’s 6.1 percent, Uganda’s 5.5 percent and Tanzania’s (5.4 percent).
The report shows America’s Citigroup Global Markets have projected the highest growth for Kenya amongst the firms sampled at 6.2 percent, which will be the highest since 7.6 percent in 2021.
It is followed by UK-based Capital Economics (5.8 percent), Moody’s Analytics of the US (5.6 percent), and global credit ratings agency, Fitch Ratings, which sees the economy grow at 5.5 percent.
Allianz of Germany, JPMorgan, and Fitch Solutions see the GDP expanding by 5.2 percent, according to the FocusEconomics outlook report.
Analysts at Oxford Economics, Standard Chartered Bank, and Euromonitor International of the UK have, however, forecast Kenya’s economic growth at a slower rate of below 5.0 percent, with all of them predicting 4.7 percent growth.
Read: Economists cut Kenya's growth outlook
Economist Intelligence Unit (EIU), HSBC of London and Goldman Sachs have, on the other hand, projected a growth of 5.0 percent.
Kenya’s inflation slowed to a 20-month low of 6.6 percent in December 2023 on slower growth in food prices because of improved rainfall, according to the Kenya National Bureau of Statistics.
A consensus forecast on inflation from the 14 institutions shows average prices of goods and services are likely to increase 6.5 percent in 2024, slower than the 7.7 percent average for last year.
“A small uptick in oil prices will add to cost pressures, but food prices (the largest component of the consumer price index) will rise at a much slower pace in 2024, given the emergence of the El Niño weather system, which typically leads to wetter weather and higher farm production in East Africa,” EIU analysts wrote in the report.
“Another inflation dampener in 2024 will be a slower pace of shilling depreciation. Steep tax rises in 2023 will drop out of the inflation equation during the second half of 2024, and future tax increases will be of a smaller magnitude.”
→ cmunda@ke.nationmedia.com
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