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Kenya Country Risk Report Q2 2018

Kenya Country Risk Report Q2 2018

Executive Summary

Core Views

Tighter fiscal policy and still-weak lending will constrain the pace of Kenya's economic growth over the coming quarters. However, improving weather conditions will lead to an acceleration overall.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Fiscal Constraints And Weak Lending Will Pose Continual Headwinds
Tighter fiscal policy and still-weak lending will constrain the pace of Kenya's economic growth over the coming quarters. However,
improving weather conditions will lead to an acceleration overall.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Monetary Policy
Price And Political Stability Pave Way For Monetary Easing
Stable inflation will allow Kenya's central bank to resume monetary easing in 2018 via a cut to its key policy rate in order to stimulate
the country's subdued credit growth. Additionally, the likely relaxation of the cap on commercial bank lending rates will further loosen
monetary conditions, offering another boost to lending.
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Deficit Will Narrow As Debt Servicing Looms Large
Kenya's budget deficit will narrow in the coming quarters after peaking in fiscal year 2016/17, as election-related spending decreases
and the government begins to embark on fiscal consolidation. However, elevated levels of debt are likely to lead to concern among
investors in the coming years as many obligations mature.
Structural Fiscal Position
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP 5 GOODS IMPORTS 2016
TABLE: TOP 5 GOODS EXPORTS 2016
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Currency Forecast
KES: Increasing Stability, But Pressures Weighted To The Downside
The Kenyan shilling is likely to experience increased stability in the coming months, given greater confidence in the country's political
outlook. However, this will not deter the shilling's longer-term trend of gradual depreciation.
TABLE: BMI KENYAN SHILLING FORECAST
Chapter 2: 10-Year Forecast
The Kenyan Economy To 2027
Economy Stable But Far From Secure
Kenya will enjoy a largely stable and robust growth outlook over the next decade, as increasing productivity and favourable
demographics contribute to increasing output. While the country's fiscal and external accounts pose a threat to this positive story, the
economy is largely well placed to meet these challenges.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Social Fragmentation And Weak Regional Profile Will Threaten Stability
While Kenya's political outlook is likely to remain broadly stable in the short term, social unrest due to long-standing ethnic tensions
could manifest to a greater extent leading up to the next election in 2022. Regional tensions and terrorism will also present ongoing risks
over our 10-year forecast period.
TABLE: POLITICAL OVERVIEW
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
Conflict Risk
TABLE: MAIN ACTIVE TERRORIST GROUPS
TABLE: POLITICAL VIOLENCE RISK
TABLE: MAJOR CONFLICT FLASHPOINTS
TABLE: BUSINESS RESPONSE TO CONFLICT RISK
Transport Network
TABLE: ROAD RISKS
TABLE: RAIL RISKS
TABLE: PORTS AND INLAND WATERWAYS RISKS
TABLE: AIR TRANSPORT RISKS
Chapter 5: BMI Global Macro Outlook
EM Growth To Accelerate In 2018 While DMs Plateau
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: KENYA – MACROECONOMIC DATA & FORECASTS

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