Kenya Business Forecast Report Q2 2009

Publication Date	February 2009
Publisher	Business Monitor
Product Type	Report
Pages	60
ISBN Number	not applicable
Product Code	BMI03423

Buy this product or for assistance call +44 20 7060 7474

PDF £250.00$416 | €280

FAX Order above formats by FAX

Summary

Global Headwinds To Hit Hard In 2009 Our outlook for Kenya has yet again been downgraded, amid a worsening picture for global growth.

Although the nation has so far emerged relatively unscathed from the global financial crisis, the effects will certainly be felt over the medium term. Transmission mechanisms will be manifold. For sure, commodity earnings will suffer during the global recession, given Kenya's orientation toward luxury exports such as tea and horticulture. Investment, too, will decline, owing to the global capital shortage. Private consumption, however, will be affected more insidiously. The effects may well be lagged, but several factors will ultimately take their toll on consumer spending, including waning remittances, a contraction of the manufacturing sector, and a possible bursting of the real estate bubble.

We expect Kenya's political scene to remain lively over 2009, with three issues likely to feature prominently. Reforms in the wake of the early 2008 post-election crisis will be at the top of the agenda, thanks to the special tribunal set up to prosecute those behind the post-election violence.

The domestic impact of the global financial crisis and the freedom of the press will also stimulate debate over the coming year. On the foreign relations scene, expectations of strengthening USKenyan ties are running high, following the inauguration of President Obama in the United States.

We believe disappointment looms.

This quarter we have drastically reduced our forecast for real GDP growth. We now see economic expansion of just 1.1% in 2009, primarily because we envisage a sharp contraction in private investment, but also owing to an expected slowdown in the growth of private consumption. In the aftermath of the global financial crisis, credit will be in short supply and risk aversion is likely to remain high. The current account will remain under pressure, and the Kenyan shilling is set to see further depreciation over the year. We are targeting KES90.00/US$ by end-09.

Despite the difficult climate for investment, the Kenyan authorities have indicated that they intend to press ahead with plans for significant infrastructure upgrades, boding well for the business environment. Kenya is set to strengthen its position as the hub of the East Africa region, with improvements to roads and railways in the pipeline, as well as a new port at Lamu. The nation attracts business thanks to its reasonably good airport facilities, flexible labour regulations and investment laws, which allow foreign investors to receive the same treatment as local investors.

Content

Executive Summary
- Global Headwinds To Hit Hard In 2009
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Three Pressing Political Issues In 2009
- A special tribunal set up to prosecute perpetrators of post-election violence will dominate Kenyas political
- scene in 2009
- Table: Kenya Political Overview
- Regional Politics
- Africa: Unlikely To Be Top Of Obamas Agenda
- We expect ties between the US and Africa to increase under Obamas tenure, in recognition of the rising importance
- of the continent
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Growth To Plunge To 1.1%
- We are forecasting real GDP growth of just 1.1% in Kenya in 2009, believing that private investment will decline markedly
- amid a global shortage of capital and risk aversion
- table: ECONOMIC ACTIVITY
- Monetary Policy
- Interest Rate Cuts To Follow Early 50bps Move
- The Central Bank of Kenyas surprise 50 basis points interest rate cut to 8.50% on December 1 is likely to
- make investors nervous at a time of heightened uncertainty
- Table: MONETARY POLICY
- Balance Of Payments
- C/A To Remain In The Red
- We are forecasting a current account deficit of US$1.8bn (5.8% of GDP), which would represent an improvement on the
- estimated US$2.6bn (8.0% of GDP) deficit recorded for 2008
- Table: BALANCE OF PAYMENTS
- Investment Climate
- Fixed Income: Great Expectations, Formidable Challenges
- Kenyas ambitious plans to upgrade infrastructure domestically and across the East African region, will present
- compelling opportunities for fixed income investors
Chapter 3: 10-Year Forecast
- The Kenyan Economy To 2018
- Robust Growth Trajectory Over 2009-2018
- Although Kenya will undoubtedly suffer in the aftermath of the global financial crisis, we remain fairly upbeat on the
- nations long-term growth prospects, forecasting annual average real GDP growth of 4.3% over 2009-2018
- Table: KENYA Long -Term Macroeconomic Forecasts
Chapter 4: Special Report
- China
- A Seismic Upheaval In 2009?
- One of the biggest and least discussed wild cards that could rear its head in 2009 is dramatic political
- upheaval in China
- United States
- Europe
- Big Trouble For European Banks In 2009
- The deteriorating global macroeconomic outlook, high levels of leverage, and a broken business model will
- combine to spell trouble for the financial services sector in 2009
- Table: Banks Leverage Ratios
- Table: Assets As % of Home Country GDP
- Table: Assets As % of Home Country GDP When Euro zone Is Considered Home Country
- Table: Exposure As % of Total Exposure To Region
- Table: Banks Foreign Exposure (US$ mn)
- TABLE: Exposure As % of National GDP
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- Institutions
- Table: BMI Business And Operational Risk Ratings
- Table: BMI Legal Framework Ratings
- Infrastructure
- Market Orientation
- Table: Middle East & Africa Annual FDI Inflows
- Table: BMI Trade Ratings
- Table: TOP EXPORT DESTINATIONS
- Operational Risk
Chapter 6: BMI Global Assumptions
- Global
- TABLE: GLOBAL ASSUMPTIONS
- Table: GLOBAL AND REGIONAL REAL GDP GROWTH, % chg y-o-y
- Economic Activity
- TABLE: DEVELOPED STATES, REAL GDP GROWTH FORECASTS
- TABLE: EMERGING MARKETS, REAL GDP GROWTH FORECASTS
- TABLE: DEVELOPED MARKET EXCHANGE RATES
- Monetary Policy
- TABLE: EMERGING MARKET EXCHANGE RATES