Country Report Kenya

Outlook for 2008-09

• Kenya's new broad-based coalition government is now in place, with Mwai Kibaki as president and his main rival, Raila Odinga, as prime minister, but a new bout of in-fighting cannot be discounted.
• The new government is expected to refocus on structural reforms, including privatisation and deregulation. However, political feuding could hamper policy implementation over the forecast period.
• Provided that the political settlement holds, the new unity government, with input from the IMF, is likely to put an economic recovery package in place. This will be based mainly on fiscal stimuli, such as targeted tax cuts.
• Real GDP growth is expected to subside to 4.1% in 2008, owing to post-election disruption in the first two months of the year and a sharp fall in tourism, before rebounding to 5.5% in 2009.
• The current-account deficit is expected to widen to 5.2% of GDP in 2008, owing to disruption to trade and a sharp fall in tourism receipts, before easing to 4.2% of GDP in 2009.

Monthly review

• The grand coalition is still settling in. Disagreement between the ODM and the PNU over whether those detained post-election should be granted an amnesty is likely to continue: the ODM is in favour but the PNU is opposed.
• The flotation of 25% of Safaricom was heavily oversubscribed: the portion reserved for foreign investors was trimmed because of huge domestic demand. Vodafone (UK), with a 40% stake, retains management control.
• Safaricom receipts will ease pressure on the budget, although there is a risk that funds will be diverted to recurrent outlays, instead of capital projects.
• Real GDP growth climbed to 7% in 2007, according to the latest annual survey, owing mainly to expansion in the service sector, especially tourism, transport, telecommunications and retailing, despite a relatively poor farm season.
• The tourism sector remains subdued owing to the political crisis: overseas arrivals fell by 50% to 93,000 in the first two months of 2008, which is also having a negative impact on a wide range of secondary activities.
• Despite post-election dislocation, the profits of major banks were significantly higher in the first quarter of 2008, helped by higher interest income. Non-performing loans fell to a low of 7.7% of total loans in February.
• The merger of South Africa's Stanbic and Kenya's CFC Bank remains on hold, despite approval from both sets of regulators and shareholders, owing to two court cases launched by disgruntled ex-employees and an ex-borrower.

• Highlights
• Outlook for 2008-09: Domestic politics
• Outlook for 2008-09: International relations
• Outlook for 2008-09: Policy trends
• Outlook for 2008-09: Fiscal policy
• Outlook for 2008-09: Monetary policy
• Outlook for 2008-09: International assumptions
• Outlook for 2008-09: Economic growth
• Outlook for 2008-09: Inflation
• Outlook for 2008-09: Exchange rates
• Outlook for 2008-09: External sector
• Outlook for 2008-09: Forecast summary
• The political scene: The grand coalition holds its first official meeting
• The political scene: Friction emerges between the coalition partners
• The political scene: Some progress is made towards resolving divisions
• Economic policy: The flotation of Safaricom is heavily oversubscribed
• Economic policy: Privatisation proceeds will ease fiscal pressure
• Economic performance: Economic growth reaches 7% in 2007
• Economic performance: The growth outlook for 2008 is less promising
• Economic performance: Banking profits move higher in the first quarter of 2008
• Economic performance: The merger between Stanbic and CFC bank is stalled
• Data and charts: Annual data and forecast
• Data and charts: Quarterly data
• Data and charts: Monthly data
• Data and charts: Annual trends charts
• Data and charts: Monthly trends charts
• Political structure