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Kenya’s 2019 Economic Outlook Positive – CBK Survey

The Central Bank of Kenya conducts a survey every two months before the Monetary Policy Committee meeting. The bank has released findings from the survey it conducted in the first three weeks of January 2019. It sought to find out the views of banks and other private sector companies on specific economic indicators.

The MPC Survey interviewed 377 heads of private sector companies on their expectations on the inflation rate, the shilling’s stability, economic growth, rate of employment, and growth in private sector credit. 66 per cent of the interviewees responded to the survey among them; senior officials of commercial banks, micro-finance institutions, hotels, and non-bank private firms.

The respondents expect inflation rate to remain within the target range of 2.5 to 7.5 per cent in the next 12 months. Favorable weather and low energy costs are some of the factors expected to keep inflation rate low.

Both banking and non banking institutions expect the Kenyan shilling to remain stable against the US dollar in January and February. However, the respondents expect the shilling to experience moderate pressure against the dollar in the next 12 months due to anticipated increase in oil prices, materialisation of Brexit, and concerns of a global recession.

The report shows that credit to the private sector is expected to increase in 2019 compared to 2018 supported by increasing economic activity and a stable macroeconomic environment. However, the interviewees noted that the interest rate cap on loans will continue to limit credit to the private sector.

Expectations on economic activities and the general business environment are positive going into 2019. The respondents predict that government investment in the Big Four Agenda will create new opportunities for businesses to grow.

Respondents from the banking and sector request to have the interest rate cap law repealed in order to increase the of loans given to private sector firms. Additionally, responds shared the need to empower development finance institutions to increase their lending to unreachable sectors.

RELATED; Kenyan Government Has an Option to Reorganise its Debt Portfolio – CBK

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