CBK growth outlook unchanged against global shocks

The Central Bank of Kenya (CBK) has retained its growth outlook in 2022 at 5.9 per cent despite headwinds posed by global economic shocks.

According to the reserve bank, the Kenyan economy is largely sheltered from recent shocks including the Russia-Ukraine war even as commodity costs pressures remain exacerbated.

“Our growth projection has not changed from what we had before. Russia and Ukraine are not significant trading partners for us and as such, our GDP projection would not dramatically deviate from the war,” CBK Governor Patrick Njoroge said.

“The indirect impact would be through global growth although we saw this from the COVID-19 crisis where the impact was not as significant.”

According to data from the CBK and the Kenya Revenue Authority (KRA), Kenyan imports from Russia and Ukraine account for a share of 1.8 and 0.9 per cent of all imports.

Wheat is the leading export from Russia at 44 per cent, ahead of fertilizers and 17 per cent and iron & steel at 25%.

Meanwhile, 74 per cent of imports from Ukraine are wheat, 10 per cent is soya beans while five per cent covers legumes.

On the flip side, exports from Kenya to the pair of warring countries stand at 1.4 per cent for Russia and 0.1 per cent for Ukraine with half of the imports to either party being tea.

The CBK says Kenya can reduce its exposure from the pair by diversifying both its source markets for imports and destinations for its exports.

Rising oil prices are however expected to impact the domestic economy with the CBK now adjusting its current account deficit (CAD) at the end of the year to a higher 5.9 per cent from an original estimate of 5.2 per cent.

The CBK however expects the government’s petrol price stabilization mechanism to cushion consumers from higher fuel prices.

At the same time, the reserve bank expects inflationary pressures to be partly extinguished by cooling food prices.

“Food prices are expected to moderate as the rains come. There are real prospects of food prices coming down especially for commodities whose prices were elevated by shortages,” added Dr. Njoroge.

“However we do understand that there would be a sticker price shock for some commodities which I believe has happened to a lot of us.”

Prospects to expand Kenya’s tourists’ source market including charter flights from Russia and Ukraine have however taken a backseat for the moment.

The 5.9 per cent GDP growth projection is anchored primarily on a rebounding agricultural sector which is expected to grow by 6.3 per cent in 2022 after a 0.9 per cent slack in 2021.

Accommodation and restaurant services have also been tipped to rebound by 17 per cent from a 7.6 per cent dip as growth in other sectors normalizes after the filtering out of base effects.