Kenya Country Risk Report Q2 2016
Economic conditions in Kenya are set to improve on the whole overthe next 12 months, with real GDP growth quickening slightly in 2016to 6.1% from an estimated 5.6% in 2015.
The politicisation of sharp ethnic divisions remains the key threatto Kenya's long-term political stability. Terrorism linked to Kenya'smilitary involvement in Somalia is likely to remain a risk, but it doesnot pose a systemic threat to political stability.
Despite a tense security situation, we believe that a booming consumerstory, a robust outlook for investment and lower oil prices willsee real GDP growth in Kenya expand at around 6.2% annually overthe next few years.
The Kenyan economy will continue to benefit from lower global oilprices over the coming quarters given its status as a net fuel importer.
Concerns about public spending will remain to the fore over the comingquarters. While we predict that the country will see its fiscal deficitnarrow modestly over the coming years, we believe that its publicfinances are in less rude health than the headline indicators suggest.
Major Forecast Changes
The release of rebased GDP figures has led to substantial revisionsto our estimates of Kenya's current account and fiscal deficits whenpresented as a fraction of GDP. Our general view on economicgrowth and the development of the Kenyan economy remainslargely unchanged.
- Executive Summary
- Core Views
- Major Forecast Changes
- Chapter 1: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- Growth Still On The Up, But Headwinds To Linger
- Economic conditions in Kenya are set to improve on the whole over the next 12 months, with real GDP growth quickening slightly in
- GDP By Expenditure Outlook
- TABLE: GDP GROWTH FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- Monetary Policy
- Hiking Cycle Over, But FX Concerns Will See Cuts Come in H216
- We believe the hiking cycle in Kenya has come to an end and the country's monetary authorities will embark on a series of cuts in 2016,
- amounting to 150 basis points. .
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Monetary Policy Framework
- Fiscal And Debt Outlook
- Fiscal Risks To Remain Salient
- Election-related spending pressures, deep-seated corruption and a lack of political will undermine fiscal consolidation efforts in Kenya
- over the next two years. We forecast only a modest narrowing of the country's gaping budget deficit between 2016 and 2020.
- Structural Fiscal Position
- TABLE: MAIN REVENUE & EXPENDITURE CATEGORIES
- Chapter 2: 10-Year Forecast
- The Kenyan Economy To 2025
- Solid Headline Growth, Rapid Economic Diversification
- Real GDP growth in Kenya will gradually accelerate over the next 10 years, averaging 6.1% between 2016 and 2025. While headline
- growth will be slower than in many African countries, Kenya's economy is relatively diversified; growth will be broad-based and relatively
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 3: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- 'Missing Eurobond' Will Tarnish Reputation
- The case of Kenya's 'missing eurobond' is proving particularly damaging for the government amid growing signs that the patience of
- investors and ordinary Kenyans is running thin.
- TABLE: POLITICAL OVERVIEW
- Long-Term Political Outlook
- Ethnic Polarisation Remains Key Challenge
- The politicisation of sharp ethnic divisions remains the key threat to Kenya's long-term political stability. Although the 2013 elections
- were peaceful, voting patterns show that the electorate continues to cast ballots according to ethnicity.
- Chapter 4: Operational Risk
- SWOT Analysis
- Operational Risk Index
- Operational Risk
- TABLE: KENYA – OPERATIONAL RISK INDEX SCORES AND RANKINGS
- Trade Procedures and
- TABLE: EXPORT AND IMPORT DOCUMENTS
- TABLE: TRADE PROCEDURES BREAKDOWN
- TABLE: SUB-SAHARAN AFRICA – TRADE PROCEDURES AND GOVERNANCE RISK
- Vulnerability To Crime
- Chapter 5:BMI Global Macro Outlook
- Global Macro Outlook
- Unfinished Business In 2016
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
- TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
- MACROECONOMIC FORECAST