I have seen many predictions of how Kenya’s economy will grow this year. There is the cautious govt position of between 3.5 and 4.5% that was contained in the economic survey released in May this year. Another school thought puts it at 4%. Finance Minister Uhuru Kenyatta, while speaking in an Africa Trade Insurance meeting in May, pegged the growth at 6.1%.
Now, the International Monetary Fund has put the growth rate at 5.7% for the year ending in June. All this sounds optimistic considering that the country is facing drought and inflation has hit 14.49%, against the Central bank’s target of 5%. Food prices, a major contributor of inflation are also rising. Bad news, right? Wrong.
While inflation will definitely affect economic growth, IMF predicts that the rate will go down from highs of 14% to the manageable levels of between 8-9% by end of the year. Maize imports will ease the food burden and hopefully, farmers will have harvested their crops by then, driving food prices down further.
IMF also cites the measures taken by the Central Bank to contain the depreciating shillings as a sign that inflation may not be with us for long.
Investments by the private sector especially in areas outside agriculture, high credit growth and the government spending on infrastructure will drive growth. To break it down, it is the construction you see going on at Thika Road, the money you, I and companies are borrowing to invest and activities like the current British American IPO that will enable the company venture into new markets and implement its growth plans, thus investing in the economy further. You can get a piece of the IPO now, just head to your stockbroker, investment bank or your bank.
I am however optimistic that there will be growth this year. Only one crucial kick is needed; to lower cost of fuel. That is why I will be watching with keen interest the announcement by the Energy Regulatory Commission today. Global crude prices are falling but the weak shillings may erase any gains from the falling prices.
Let us hope the fuel prices come down. It will be another piece of good news today.
Earlier, Renson had asked why the shareholders of British American have chosen to list. I will answer that question in details tomorrow as I give you a breakdown of how the money will be used.