November inflation at 6.8% as CBK predicts higher risks

Tuesday, December 5th, 2023 20:25 | By
Central Bank of Kenya (CBK)
Central Bank of Kenya (CBK). PHOTO/@CBKKenya/X

The Central Bank of Kenya says that the risks for inflation remain high for the future, even as the inflation rate for November 2023 remained at 6.8 per cent as compared to 6.9 per cent in October.

In a statement, CBK revealed that food inflation declined to 7.6 per cent in November from 7.8 per cent in October, attributed to lower prices of key non-vegetable food items, particularly maize and wheat flour.

Prices of several vegetable items including onions, tomatoes, and carrots, remained elevated in November due to reduced supply.

Fuel inflation increased to 15.5 per cent in November from 14.8 per cent in October.

Other inflation rates

Non-food non-fuel (NFNF) inflation declined modestly to 3.3 per cent in November from 3.6 per cent in October.

"The risks to inflation are elevated in the near term, reflecting the impact of second-round effects of the rise in fuel inflation and pass-through effects of the exchange rate depreciation," CBK stated.

Inflation graphic. PHOTO/ Netsuite
Inflation graphic. PHOTO/ Netsuite

According to the GDP data for the second quarter of 2023, there was continued strong performance of the Kenyan economy, with real GDP growing by 5.4 per cent compared to 5.2 per cent in a similar quarter of 2022.

"This performance reflects a strong rebound in the agriculture sector, and resilient services sector supported by robust activity in information and communication, transport and storage, financial and insurance, and accommodation and food services. Leading indicators of economic activity show continued strong performance in the third quarter of 2023," CBK stated.

"Despite the global uncertainties, the economy is expected to continue to strengthen in 2023 and remain strong in 2024, supported by a resilient services sector, the rebound in agriculture, and implementation of measures to boost economic activity in priority sectors by the Government."

Goods exports declined by 2 per cent in the 12 months to October 2023, compared to a similar period in 2022.

Receipts from chemicals and manufactured exports increased by 5.1 per cent and 13.9 per cent, respectively.

"The increase in manufactured exports receipts reflects strong regional demand. Imports declined by 14.9 per cent in the 12 months to October 2023 compared to a growth of 14.7 per cent in a similar period in 2022, mainly reflecting lower imports across all categories except food," CBK added.

Tourist arrivals improved by 34.1 per cent in the 12 months to October 2023, compared to a similar period in 2022.

Diaspora remittances totalled USD 4.165 billion in the 12 months to October 2023, and were 4.2 percent higher compared to a similar period in 2022.

"The CBK foreign exchange reserves, which currently stand at USD 6,746 million (3.62 months of import cover), continue to provide adequate cover and a buffer against any short-term shocks in the foreign exchange market," CBK added.

In the banking sector, the ratio of gross non-performing loans (NPLs) to gross loans stood at 15.3 per cent in October 2023 compared to 15.0 per cent in August 2023.

"Increases in NPLs were noted in the manufacturing, trade, personal and household, building and construction, and transport and communication sectors. Banks have continued to make adequate provisions for the NPLs," the regulator added.

CBK notes that strong credit growth was observed in manufacturing (18.4 per cent), transport and communication (16.2 per cent), trade (9.9 per cent), and consumer durables (10.8 per cent).

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