Despite Kenya reeling from the effects of the coronavirus pandemic, the economy is set to expand by 3.1% this year, according to the Central Bank Governor Patrick Njoroge.
The forecast reflects growing optimism among policy makers; though the Central Bank Governor’s estimate is the highest. The Ministry of Finance is expecting a growth of around 2.5% and the International Monetary Fund (IMF) projects a contraction of -0.27% this year.
Patrick Njoroge told reporters in an online news conference that “the country is in a transition post-COVID.” He also cautiously said that the bank’s forecast for the year has a wide margin of error due to lingering uncertainties resulting from the pandemic.
President Uhuru Kenyatta began a gradual re-opening of the economy on Monday, saying the COVID-19 infection curve had flattened. Bars were finally allowed to reopen since they were shut down more than 6 months ago, and curfew hours were reduced to between 11pm and 5am.
The Monetary Policy Committee (MPC) maintained the benchmark lending rate at 7.0% for the fourth consecutive time on Tuesday, as some fiscal stimulus measures unveiled when the pandemic hit the country were yet to be trickle down the economy.
Governor Patrick Njoroge also says that the accommodative stance will continue.
“We will hold onto this policy and when there is new data we will act accordingly,” he said.
In March and April, the MPC cut policy rates by 125 basis points and market participants are pushing for moves to raise them back up again so as to boost the shilling currency.
The Central Bank Governor projects that the economic growth will be fuelled by expansion in the farming and information technology sectors, as well as recovery in the remittances sent by Kenyans living abroad.
“We are benefiting from the rather favorable weather conditions,” he said, citing production of food crops and buoyant tea exports.
He however issued a warning that the critical accommodation and restaurants sector, which covers tourism, is expected to contract by -40% this year.
“This is the soft spot,” he said. “The recovery of that will be contingent on the recovery of international travel.”