NCBA projects economy to grow by 5.8pc in 2021
Kenya’s gross domestic product (GDP) is projected to grow by 5.80 per cent in 2021, says NCBA Regional Economic Outlook Report.
The growth forecast, which is an upward revision to the bank’s initial baseline estimate of 5.3 per cent in May 2021, is supported by a better-than-expected evolution of the public health crisis that continues to support quicker softening of mobility restrictions.
NCBA projects GDP growth to remain above trend at 5.2 per cent in 2022 driven by the continued release of earlier pent-up demand.
The report shows that, trade, real estate, health care and financial services are all expected to revert to historical growth trends.
Manufacturing could also emerge stronger as companies rebuild inventory in response to growing demand.
The sectors hardest hit by the pandemic such as accommodation, education, trade, and transport are projected to maintain above trend growth as the economy “normalises”.
These sectors now contribute more to GDP after the rebasing of national accounts.
Disruptions to agriculture from the pandemic, NCBA notes, has been moderate although harsh weather could keep growth below the historical average.
Economic growth sensitivity to agriculture has waned after the recent rebasing of the economy. The sector now contributes about 23 per cent to GDP, a marked decline from 33 per cent, prior to rebasing.
Sectors hardest hit by the pandemic notably services are leading the rebound driven by low base effects and upside from easing of containment measures.
Speaking during NCBA Economic Forum, Group Managing Director, John Gachora said the economic recovery will tightly track the path of the pandemic into 2022.
Transition to normalcy
“The transition to normalcy that began in late 2020 will continue as public and business anxiety over the virus wanes and stringent containment measures begin to diminish,” said Gachora.
NCBA is, however, warning that growth could quickly slide back to the pre-crisis trend beleaguered by high input costs, rising energy prices and the steep tax landscape.
A weak exchange rate, NCBA notes, could cause significant price pressures with negative implications for purchasing power of consumers, and therefore demand.
The financial institution says in its analysis it does not expect the upcoming 2022 elections to adversely affect the economy unlike in previous years. The bank is optimistic that investments could increase immediately post-the election, offsetting any pre-election lull.
“Concerns over the uncertainty presented by the 2022 elections cannot be gainsaid. However, recent election cycles suggests that sentiment around elections and investments could be overdone.
However, confidence in institutional maturity and the Judiciary’s ability to resolve election disputes has risen in recent years, providing the much-needed respite,” noted Gachora.