The Central Bank of Kenya(CBK) expects Kenya’s economy to recover in the new year. The statement was made by the CBK Governor Dr. Patrick Njoroge, following the Monetary Policy Committee(MPC) meeting held on 29th April. The team cut the policy rate to 7%, the lowest rate since 2011.
Dr. Njoroge said the economy was forecast to grow by 6.4% in 2021 compared to 2.3% growth this year.
“We expect 2021 to be a rebound. Currently, roughly the estimate is around 6.4%. But I think the point is we will revise that, given the uncertainties that we have,” he told an online news conference.
Kenya’s economy has been hit by the locust invasion, and now the worldwide coronavirus pandemic. Among the most affected sectors are tourism, horticulture, and manufacturing, all struggling to cope with effects of COVID-19.
The CBK’s projection is more positive compared to adverse predictions by the World Bank of 5.2% growth in 2021.
A Reuters poll of economists forecasts growth of 5.0% in the Kenyan economy next year.
CBK will be tested on how it manages the Kenya Shilling which is experiencing downward pressure. The Shilling has been under pressure partly due to poor earnings from the horticulture industry and weak tourism earnings, key sources of forex for Kenya.
“When others are hit significantly because they are oil producers or primary commodity producers…….their currencies have weakened dramatically,” said Dr. Patrick Njoroge, CBK Governor.
Kenya’s current account deficit is projected to narrow to 5.6% of GDP in 2021 compared to 5.8% of the GDP in 2020.
This projection is subject to an injection from the International Monetary Fund of $750 million in emergency assistance next week.
National Treasury is also expecting another $1 billion from the World Bank in the next two weeks.