Analysts identify key economic drivers

Among others, growth will be bolstered by a rebound in both public and private investments, says Genghis Capital

Kenya’s real GDP growth will stand between 5.25% – 5.75% in 2018 up from 4.70% in the first three quarters of 2017, according analysis by Genghis Capital. The  investment bank today releases its Genghis Playbook 2018, which shows growth will be bolstered by a rebound in both public and private investments, positive performance in the agricultural sector and continued recovery in service sectors.

More focus on food security, affordable housing, the manufacturing sector and universal affordable healthcare listed as key delivery pillars for the Jubilee administration in his second-term economic plan will positively contribute to the country’s economic growth added the Genghis Playbook 2018.

“The Playbook 2018 seeks to bridge the gap between our clients and our research material,” said Elizabeth Wangechi, Head of Research, Genghis Capital, during the Playbook launch. “We move away from the traditional valuation reports and run our own Kenyan notional equities and fixed income portfolios.”

Drawing on the latest research, analysis and evidence from the leading analysts, the Playbook 2018 further highlights the following key projections:

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Global Economic Growth: Global economic growth in the year is forecast at 3.90% driven by uptick in activity and accommodative financial conditions. Headwinds to growth include protectionism, geopolitical tension and an accelerated pace of core inflation in advanced economies.

Inflation Outlook: The inflation outlook is mild inflationary pressure in first half period due to the base effect before ticking upwards in the second half.  Private Sector Credit Growth (PSCG) to remain stuck at current low levels of 2.0% – 4.0% in the year due to continued crowding-out effect.

Current account deficit: Current account deficit to further widen to 7.0% in 2018 due to the expected high external capital goods expenditure and feed-through from rebounding global oil prices.

Dollar vs shilling: Diaspora remittance, tourism earnings and the re-bound in exports to support the shilling between 102.00 and 104.00 level in 2018. The broad dollar strength due to US Fed interventions to pressure the local unit.

Fixed income outlook:

  • Secondary market turnover to trend higher; corporate bond segment to remain subdued.
  • More bond re-openings to meet development needs.
  • Maturity structures indicate refinancing risk; recommend longer-term bond issues to smoothen refinancing risk.
  • Banking sector liquidity dictate trading and T-Bill performance; setting up of central depository for horizontal repo will improve liquidity management.
  • Impact of interest rate law – Banks to continue crowding-out private sector. Expect yield curve to remain flat at the long-end.

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