Country Report Kenya July 2009

Outlook for 2009-10

• Kenya's coalition government between the president, Mwai Kibaki, and his main rival, the prime minister, Raila Odinga, is likely to remain intact but will continue to face serious strains because of in-fighting and competition.
• Economic policymaking will be challenging during the forecast period, given the global slump and weak domestic growth. The government will push ahead with reforms but political feuding may hamper implementation.
• Real GDP growth is expected to stagnate at 1.8% in 2009 owing to dry weather, weak commodity prices and the global recession. Growth is expected to recover to 2.7% in 2010 as the global economy improves.
• Inflation is forecast to remain high in 2009, at 21.3% (as dry weather keeps food prices high), before subsiding to 6.5% in 2010, assuming no exogenous shocks and the maintenance of political normality.
• The current-account deficit is expected to fall from 5.7% of GDP in 2008 to 4.5% of GDP in 2009, owing to lower imports. A recovery in exports and other capital inflows will help to cut the deficit to 3.3% of GDP in 2010.

Monthly review

• Kenya has won extra time, until July 2010, to establish a special tribunal to prosecute post-election violence but, as part of the bargain, has now sanctioned the involvement of the International Criminal Court.
• The IMF projects that the budget deficit will climb from 5.1% of GDP in 2008/09 to 5.4% of GDP in 2010, to be funded largely from domestic borrowing, although Kenya's risk of debt distress is relatively low.
• The Central Bank of Kenya plans to introduce a new cheque-clearance system on October 1st, which is intended to speed transactions and cut fraud.
• Real GDP grew by 3.9% year on year in the first quarter of 2009 but the economy came off a very low base a year earlier, and agriculture, the largest sector, continues to contract owing to substandard rainfall.
• The government plans to increase oil-fired power generation because poor rainfall is denting hydroelectric output, but it is not clear whether load-shedding can be avoided.
• The first two of three planned submarine fibre-optic cables landed in June and are currently undergoing testing. Services are due to start within the next three months and are expected to bring cheaper and faster communications.
• CFC-Stanbic Bank raised KSh2.5bn (US$32m) from the sale of a corporate bond in June and plans to raise another KSh2.5bn in 2010/11.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;49;60;53;59;48;2834;80;1;70
NAICS Code: 336;22;52;44;517;3254;62;11;72