Kenya Business Forecast Report Q2 2010 : Market Research Report

Kenya Business Forecast Report Q2 2010

Published by: Business Monitor International

Published: Feb. 5, 2010 - 66 Pages

Executive Summary: Drought Compounds Political Risks
Chapter 1: Political Outlook: Long-Term Political Outlook; The Next 10 Years Depend On The Next Two; Kenya faces many obstacles on the road towards a mature post-ethnic democracy, as evidenced by the violence; following the disputed 2007 election.
Table: Political Overview
Chapter 2: Economic Outlook: Economic Activity; Flat Q309 Number Sets Up Robust 2010; With flat growth in the third quarter, the government’s hopes of real GDP growth in excess of 3.0% in 2009 have; been dashed.
Table: GDP BY EXPENDITURE: Balance Of Payments; C/A Deficit To Widen; After contracting in 2009, we see Kenya’s current account deficit beginning to widen again in 2010, to; US$2.4bn - equivalent to 5.4% of GDP, from an estimated US$1.9bn in 2009.
Table: CURRENT ACCOUNT: Monetary Policy; Rates: No Change Until H210; The extent of the cut in Kenya’s central bank policy rate - by 75 basis points to 7.00% - on November 24 surprised most; observers, given the widespread expectations that rates would remain on hold.
Table: MONETARY POLICY: Exchange Rate Policy; KES: Improving Inflows To Boost Shilling; We are medium-term bullish on the Kenyan shilling, believing that an improvement in both the domestic and; external pictures will be supportive of gains.
Table: EXCHANGE RATE: Banking Sector; Well-Placed For Economic Recovery; Kenya’s commercial banking sector remaining underdeveloped has shielded it from the kind of financial; implosions experienced in more advanced economies.; Regional Outlook; Growth: V-Shaped Recovery In Store For 2010; Even amid the worst global recession since the 1930s, the three largest economies of East Africa - Kenya,; Tanzania and Uganda - have still managed to post enviable levels of growth, of an expected 2.5%, 4.9% and 7.0%,; respectively, in 2009.
Chapter 3: 10-Year Forecast: The Kenyan Economy To 2019; Robust Growth Trajectory; Although Kenya will undoubtedly suffer in the aftermath of the global financial crisis, we remain fairly upbeat on; the nation’s long-term growth prospects, forecasting annual average real GDP growth of 4.9% over 20010-2019.
Table: Long-Term Macro economic Forecasts
Chapter 4: Special Report: Political Risk In The Next Decade; What To Expect In 2010-2019
Table: Countries Facing Major Leadership Succession In 2010-2019
Table: Countries At Risk Of Major Political Upheaval
Table: Countries At Risk Of Interst ate Conflict Or Heightened Bilateral Tension
Table: Cou ntr ies Facing Secess ionist Or Auto nom y Movements , Insurg encies, Or Civil Wars
Table: Pivot al States
Chapter 5: Business Environment: Business Environment Outlook
Table: BMI Business And Operational Risk Ratings: Institutions
Table: BMI Legal Framework Ratings: Infrastructure; Market Orientation
TABLE: MIDDLE EAST & AFRICA, ANNUAL FDI INFLOWS
Table: BMI Trade Ratings
TABLE: TOP EXPORT DESTINATIONS: Operational Risk
Chapter 6: BMI Global Assumptions: Global Outlook; 2010 Looking Rosier
TABLE: GLOBAL AND REGIONAL REAL GDP GROWTH
TABLE: develop ed market exch ange rates
Table: Emerg ing Market Exch ange Rates
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES
TABLE: EMERGING MARKETS

Abstract

The global economic recession has had only a muted affect on Kenyan growth. Certainly, a collapsein export markets for cut flowers and in tourism, Kenya’s largest forex earners, has had animpact, as has the severe drought affecting the country, but this has been counterbalanced bylower imports and robust global prices for tea and coffee. Growth is expected to accelerate in 2010,but the effects of the drought and political developments present key downside risks.

Progress on political reform has been hampered by the continued fighting between President MwaiKibaki’s Paty of National Unity and Prime Minister Raila Odinga’s Orange Democratic Movement.Failure to reform the judiciary and security services, and to draw up a new constitution for the electionsscheduled for 2012, risk storing up the potential for further rounds of ethnic-based politicalviolence. Indeed, if a constitution is not ready in time, then we would not discount the possibilityof elections being postponed in order to forestall unrest.

Kenya should see growth quicken in 2010 and beyond, in part on the back of a tentative globalrecovery, in part supported by the government’s ambitious infrastructure spending programme.Also, favourable late rains in 2009 should be supportive of agricultural production and domestichydropower generation that have suffered due to drought. Indeed, we see the continuing narrowingof the current account deficit over the medium term, eventually boosted by the coming onlineof oil exports from neighbouring Uganda. Concerns about food security and price growth shouldalso recede.

Large-scale investment in infrastructure will support an improvement in Kenya’s business environment,as well as its productive capacity. Nevertheless, corruption will remain a key concern ofboth domestic and international investors. The government’s privatisation programme may reducethe state’s influence in business and generate much-needed revenues, but the political backdropwill remain crucial in order to give investors confidence. Indeed, political distractions are alreadyhampering drought relief efforts.

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Kenya Business Forecast Report Q2 2010

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Abstract