Country Report Kenya September 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 20.5% (as drought puts pressure on 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 5.8% of GDP in 2008 to 5% of GDP in 2009, helped by lower imports. A recovery in exports and other inflows will help to cut the deficit to 3.3% of GDP in 2010.

Monthly review

• As a first step towards promised reforms of the police force, Mr Kibaki appointed Mathew Iteere as the police commissioner in place of Hussein Ali, but further action will be needed to restore the force's poor reputation.
• The president's decision to reappoint Aaron Ringera to lead the Kenya Anti Corruption Commission, without following prescribed procedures, has sparked a revolt in parliament that may oblige the president to backtrack.
• A new re-weighted and reformulated consumer price index, based on spend-ing patterns in the most recent household survey, is likely to be introduced in February 2010 and is expected to lead to a decline in headline inflation.
• Kenya slipped down the World Bank's latest Doing Business rankings to 95th place (out of 183), from 84th last year, owing to lack of new reforms, although the government plans to undertake fresh deregulation.
• India's Essar has completed the purchase of 50% of Kenya's oil refinery and commissioned studies to guide a planned US$400m upgrade.
• The prospects for titanium mining at Kwale have improved since Jinchuan, the Chinese state miner, took a controlling stake in the long-delayed venture.
• Kenya's current-account deficit increased in the second quarter of 2009 as exports fell faster than imports while earnings from tourism and remittances declined.

This report covers the following industry codes:
SIC Code: 60;48;10
NAICS Code: 52;517;212