The State of the Economy in the 1st Half of 2018 According to the Kenya Market Update By Knight Frank

Knight Frank Kenya Managing Director Ben Woodhams, Charles Macharia and Maina Mwangi.

The Kenyan economy is expected to grow
by 5.8% in 2018 compared to 4.9% in 2017,
according to the World Bank.

This anticipated growth is mainly attributed to the improvement of Kenya’s traditionally strong sectors, including tourism and agriculture. The latter is expected to grow due to favourable weather conditions which will result in lower food prices.

Other factors include the stabilising political
climate, higher exports due to improved
global and regional economic growth, and
completion of ongoing infrastructure projects. The economy is estimated to have expanded by 5.7% in the first quarter of 2018 compared to 4.8% in a similar period in 2017 according to Knight Frank Kenya’s Market Update – 1st Half 2018.

Knight Frank Kenya Managing Director Ben Woodhams, Charles Macharia and Maina Mwangi.

The Sub-Saharan Africa annual GDP rate is
expected to rise by 3.1% in 2018 compared
to 2.4% in 2017, according to the World
Bank. The main factors that will contribute to this expansion include the expectation that oil and metal prices will remain stable, global trading will remain strong, and that individual governments will implement reforms to address macroeconomic imbalances whilst boosting investment. The economic expansion is also
attributed to the anticipated growth in the
region’s three largest economies: Nigeria,
Angola and South Africa, and improved
agricultural sector growth in East Africa.

The value of building plans approved
in Nairobi County decreased to Kshs 60.11
billion in the first quarter of 2018 compared to Kshs 61.72 billion in the first quarter of 2017. The decrease in production and consumption of cement, as well as building plans, may be an indicator that the construction sector is still recovering after the prolonged electioneering period, while the current oversupply in the market and low transactions have made developers hesitate to commence new-builds.

The Kenya Shilling strengthened against major currencies such as the Sterling Pound and Euro in the first half of 2018. Overall, it remains relatively stable against the US Dollar and Chinese Yuan.The Monetary Policy Committee (MPC) lowered the Central Bank Rate in March from 10% to
9.5% to stimulate economic growth. Similar
to the second half of 2017, month-on-month
inflation decreased gradually but remained
within the government’s target range.

However, overall year-on-year inflation ticked up for the second consecutive time in June to 4.28%. Commercial banks’ interest rates remained capped at 4% above the Central Bank Rate, but the government announced through the 2018/19 Budget Statement a proposal to amend the Banking (Amendment) Act 2016 to allow lenders to provide more credit, particularly to borrowers considered risky.

It is anticipated that lifting the interest rate
cap would boost the level of liquidity in the
economy and increase transactional activity.