Central Bank of Kenya (CBK) Governor Kamau Thugge has insisted that Kenya’s economy will continue growing in 2024 despite the hardships experienced including floods.
Speaking during a monetary policy committee media briefing, the CBK Governor maintained that the institution would rely on the earlier released economic forecasting indicating that Kenya’s economy will grow by 5.7%.
Additionally, he pointed out that the economy grew by 5.8% in the first quarter of the year, compared to 2023 when the economy recorded a 5.6% growth.
“Despite the recent flooding in some parts of the country, the economy is expected to remain strong in 2024 supported by the resilient services sector and robust performance of the agricultural sector,” said Thugge.
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CBK on Predicted Exchange Rates and Inflation
The CBK Governor also indicated that the country would enjoy a stabilized exchange rate for the rest of the year despite expected inflows from global financial institutions like the International Monetary Fund (IMF) and the World Bank.
Additionally, he noted that the exchange rate will not be affected by the settlement of the remaining portion of the Eurobond.
“We expect going forward a fairly stable exchange rate. We don’t see significant weakening or significant strengthening,” he said.
On the flip side, Thugge said that international interest rates will remain higher for a much longer time than anticipated adding that the government will have to consider external developments to widen the rates.
“We have to be very cautious, that we don’t take measures here that will cause the same kind of problems we had last year, which is to widen the interest rate differentials between Kenya and advanced economies,
“Whereby we see capital flowing out. We are going to be cautious, and we will have look at developments externally, and on the basis of that we will be able to address the CBR at the appropriate time,” Thugge added.
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World Bank’s Prediction and Warning
In its report released on Wednesday, June 5, the World Bank warned that despite Kenya’s real GDP growth accelerating in 2023 to 5.6 percent from 4.9 percent in 2022, it was expected to slow to five percent for the rest of the year.
According to the report, Kenyan exports had significantly underperformed, noting that “the country has not diversified its products in recent years and has lost competitiveness in the markets to which it exported”.
However, World Bank country director for Kenya, Keith Hansen, welcomed Kenya’s decision to partly repay a Ksh259 billion ($2-billion) Eurobond due to mature later in July.
“It is a move that will significantly ease the immediate liquidity constraints for the year, instilling a sense of calm in the markets,” he said.
On the other hand, the government of Kenya was advised to tackle the climate-related vulnerabilities the country is facing especially for agricultural exports.
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