Mixed News for Kenya’s Struggling Economy
With nationwide and local political elections set for August 2022, the Kenyan economy is undergoing a transition from a very good year to one that might be less than stellar. The African economic power is just coming off a better-than-expected 2021 growth rate of 8 percent. Virtually no one expects 2022 to match that rate, with most of the nation’s economists looking to a more tepid 5.9 percent growth this year.
Like many of its neighbors, Kenya’s economy comes almost to a standstill during election season, which is just six months away. Even with the expected slower growth and the elections, Kenya’s economic outlook for 2022 will almost certainly be buoyed by an uptick in service sector activity, increased demand, and a near total recovery within a formerly struggling agricultural sector. Two bright lights that are also expected to support a strong 2022 include the nation’s coffee industry as well as its general exports.
Last year the coffee industry in Kenya saw an unprecedented expansion of more than 15 percent. Similarly, the country’s exports in 2021 grew by more than 11 percent to round out a year in which nearly every niche of the national economy grew in comparison to 2020’s numbers. Other developments that are expected to play a central role in this year’s financial outlook for Kenya include the following:
- Continued strong performance in retail investment activity due to a slow recovery of local sales as COVID restrictions ease
- Intermediate goods, particularly oil, underwent significant improvements in 2021. Due to petroleum imports growing so much last year, Kenya saw an overall ramp up of imports to the tune of more than 25 percent.
- Officials announced that the national bank would set the 2022 primary lending rate at a healthy 7 percent. One reason for the modest number is the nation’s recent decline in price pressure across the board, which plays a pivotal role in the setting of the annual rate
- The nation’s international reputation as a tourist destination thanks to favorable rates in the forex market for major foreign currencies against the Kenyan shilling continues to support the national financial picture. One result has been a significant increase in transport and tourism income across the board, with a continued favorable outlook for the remainder of this year.
- National government spokespersons noted that the account deficit is expected to remain within its current range, with this year’s figure looking to be approximately 5.2 percent of official GDP totals.
- Compared to the prior 12-month period, Kenya’s remittances experienced noticeable improvement, reaching the $3.7 billion-mark last year. That compared extremely favorably to 2021’s lukewarm figures and represented a full 20 percent increase in the category.
- With a lack of voter interest in upcoming elections and a slowdown of general economic activity during the August election cycle, many nearby nations fear that the regional stability offered by the Kenyan government might wither if the elections are hotly contested or deliver an uncertain result. Kenya’s dozens of political parties are forced to work together in often shaky coalition governments.
- Two forces that are expected to continue to hold back a strong year are the continuing economic fallout from the near shutdown during the COVID pandemic and what many citizens view as widespread corruption among government officials.
- Despite raw economic numbers that are generally positive, the Kenyan elections could throw a wrench into the otherwise healthy economic outlook.