NAIROBI, Kenya, Jan 18 – Kenya’s economy is expected to rebound with a GDP growth of 6 per cent in 2023 following the absence of the factors like drought and elections that impacted growth last year, a new outlook by ICEA LION Asset Management shows.
In the outlook, the fund manager notes that the agriculture, manufacturing, transport, information and financial services sectors are expected to record improved performance this year driving economic recovery.
“We anticipate GDP growth in 2023 to approach or exceed 6 per cent if normal or near-normal rainfall resume during the long rains season, and there are sufficient measures put in place in advance for the adverse impact of a potential El Nino season (which tends to follow La Nina) on harvests or access to markets,” the outlook reads.
According to ICEA LION Asset Management CEO, Einstein Kihanda, the rebound in the sectors could spare Kenya from the looming global economic downturn.
The outlook highlighted that developed market economies are expected to slow down and even potentially go into recession in 2023 as a result of central bank rate hikes aimed at taming inflation, especially in the first half of the year.
Even so, Kihanda said, “While there is likely to be a slowdown in developed market economies, localized factors could mitigate the impact on the Kenyan economy in 2023.”
The outlook notes that rainfall will also have a beneficial impact on food prices while the global economic slowdown should see a reduction in the price of oil.
As such, headline inflation is expected to go below CBK’s target rate of 7.5 per cent in the course of the year.
The country’s inflation stood at 9.1 per cent in December, remaining above the CBK target rate for the past six months.
Further, investors were urged to be cautious in the first half of the year and focus on treasury bills and short term bonds to take advantage of any additional increases in interest rates.
“For long term, the Nairobi Securities Exchange provides an opportunity in the current sell-off to acquire stocks at cheap prices and also enjoy some very high dividend deals,” said Judd Murigi, Head of Research at ICEA LION Asset Management.
On debt, the country is projected not to default on debt repayment obligations if the government continues to cut costs and borrowing.
“We still have some space to manage our debt situation, but it is important that the govt maintains its focus on cutting costs so as to cut our budget deficit so that our debt situation is manageable,” said Murigi.
