Kenya’s Gross Domestic Product (GDP) is expected to recover to 5.8 percent in 2020 driven by base effects in agriculture, manufacturing and financial services.
According to the ICEA Lion Asset management Head of Research Judd Murigi, the firm expects 2020 to be the year of economic convalescence.
Speaking Tuesday when presenting its 1st quarter 2020 Investor Pulse outlook, the real economy he said is expected to start healing this year on the back of renewed private sector credit growth and also dependent on improved timeliness in payments to suppliers.
“In 2019 ten sectors representing 70 percent of GDP experienced decelerated growth compared to 2018 when only four sectors decelerated,” she said.
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He noted that Agriculture, Manufacturing, Construction, Trade, Hospitality and Transport were among sectors that grew at a slower pace compared to 2018 performance.
However, Mr. Murigi said the recovery in the agriculture sector in particular faces risks from destruction caused by heavy rains in the late 2019 and the ongoing locust invasion.
“Increasing political risk is an emerging risk factor that could peg back the economic recovery not in Kenya but across the region in light of upcoming elections in Tanzania, Uganda, Ethiopia, Somalia and Burundi,” he said.
The share of SME loans as a proportion of total banking sector loans Murigi said declined from almost 25 percent prior to the rate cap to 15 percent in 2019.
“We estimate that SMEs were denied credit of up to Sh 300 billion over the rate cap period an amount equivalent to 1 percent of GDP per year,” he said.
ICEA LION Asset Management CEO Einsten Kihanda said that the economic outlook for Kenya is certainly better this year, although the effects will probably only be felt going into the second half of the year and beyond.
Kihanda who is the current chairman of the Fund Managers association said that despite being better the economic growth will however be dependent on distinctive factors in the agriculture sector, faster payment of suppliers and continuation of the a moderate political environment.
ICEA LION Group is a one stop shop for insurance and related financial services with roots dating back to 1895.
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