Country Report Kenya May 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 weaken further, from 2.2% in 2008 to 1.8% in 2009, owing to 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 21.8% (as dry weather continues to push up food prices), 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 8% of GDP in 2008 to 5.1% of GDP in 2009, owing to lower imports. A recovery in exports and other capital inflows will help to cut the deficit to 4.5% of GDP in 2010

Monthly review

• The coalition came close to fracturing in April when a dispute between the PNU and the ODM over the house business committee brought parliament to a halt. The speaker devised a temporary solution but stresses remain.
• The Interim Independent Election Commission (IIEC) has been sworn in, replacing its discredited predecessor. A new boundary commission will review Kenya's electoral and administrative boundaries.
• The government continues to push ahead with privatisation despite the challenging economic conditions. The National Bank of Kenya, Kenya Wine Agencies and two of Nairobi's five-star hotels will be first on the list.
• The EAC, which plans to introduce a common market in January 2010, is turning into a two-track community, with Tanzania in the slow lane. Tanzania has secured crucial "opt-outs" on land ownership and travel rights.
• To help to cement regional integration, work to upgrade a key road between Kenya and Tanzania, costing US$155m (and funded by donors), is now under way.
• The government raised the minimum wage by 18% on May 1st but the move disappointed both employers (who were seeking another freeze) and low-paid workers (who are suffering from high inflation). Job losses are increasing.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;70;1
NAICS Code: 52;72;11