British-American Asset Managers (BAAM) has projected an economic growth of 5.3 percent for 2012, an improvement from last year’s forecast of 4.6 per cent. This is based on the belief that inflation will ease in the coming months, with the normalisation of rainfall, a drop in international oil prices and the stability of the local currency.
“Prospects of rainfall, falling inflation risks and lower energy prices are likely to improve the 2012 growth prospects while the recent stability of the Kenyan shilling has tempered inflationary expectations,” said the Company’s Managing Director Edwin Dande. Globally, the economy is forecasted to grow at 2 per cent, down from 2.6 per cent.
This is attributed to stubbornly high unemployment in advanced economies which is hurting consumption and is against the backdrop of a deepening Euro Zone Crisis and deteriorating public sector balance sheets amongst Developed Markets.
“The silver lining in the global economy remains emerging markets and sub-Saharan Africa. Emerging markets consumers are still spending more and are under leveraged compared to their developed markets counterparts, leading to consumption driven Gross Domestic Production GDP expansion,” says Dande, adding that six of the top 12 fastest growing economies in the world in 2012 are in sub-Saharan Africa.
It is said that the region possesses strong repeated and structural undercurrents with expanding populations and growing middle classes. The political environment may influence the growth of the economy especially with the ICC process and the preparations of the upcoming elections.
“What gives us confidence is the continual strengthening of institutions such as, Independent Electoral and Boundaries Commission (IEBC) and the Judiciary,” he added. The company projects that the Nairobi Stock Exchange (NSE) will trade sideways for most of 2012.
However a more durable rally could evolve later in 2012 depending on global economic performance. “We continue to see volatility on local equities market over the coming 6-8 months. Some sectors are attractive especially in this environment with a bias towards more defensive stocks that are less exposed recurring factors including inflation, currency fluctuations and interest rates,” says Dande.
