It would be foolish to say the worst is behind us, CBK Governor Njoroge says on economy

The Central Bank of Kenya (CBK) has remained pragmatic on economic prospects to Kenyans this year even as the green light flashes on a potential recovery.

Speaking at a post Monetary Policy Committee press conference on Friday, CBK Governor Patrick Njoroge has emphasized for the need of caution in spite of economic data pointing towards a rebound in the second half of the year.

“We do not want to be bullish, I would even say it’s foolish to say the worst is behind us. We need to be cautious. At the end of the day, it’s not GDP that matters,” he said.

“The expectations that we are going to sink much further has not been born by the reality, even so, I don’t think the numbers in the end reveal the pain to individuals.

The reserve bank Governor further warned developments in the going countries as COVID-19 cases continue unchecked while some countries suffer setbacks in the attempt to re-open their economies in the pandemic’s error.

Domestically, the optimism has emerged following recent government measures to ease COVID-19 mitigation measures to include a revision on the night time curfew and a lift on part of travel restrictions.

Moreover, headline economic data during the month of May has revealed a rebounding economy from previous months.

Even so, the CBK maintains most Kenyans still remain in distress.

“For SMEs, it would be hard to say that the worst is behind them, just yesterday, we had the Gikomba market burn down. You go down the bypass and find lawyers and accountants in these hustling environment where they are now selling vegetables,” added Dr. Njoroge.

Green lights flashing

In spite of CBK’s pragmatism, new economic data for May is representative of a rebounding enterprise scene in the country.

Growth in the first quarter of the year is for instance expected to be strong even as the impact of COVID-19 was more pronounced from the month of April.

Leading economic indicators in the month of May however evidenced a recovery with exports in five months marking a 4.1 percent growth in comparison to a similar period last year supported strongly by tea, horticulture and re-exports.

The volume of tea exported for instance surged by 23.5 percent while horticulture exports are almost at pre-COVID-19 levels from a pick up in demand as destination markets re-emerge from restriction measures.

Further, diaspora remittances have recovered from a drop in April rising to to Ksh.27.5 billion ($258.2 million) in May from Ksh.22.2 billion.

Moreover, credit to the private sector has remained strengthen growing by 8.1 percent in 12 months to May against the hostile lending environment.

The banking industry has also remained strengthened with banks marking an ease in the accumulation of loan defaults with gross non-performing loans (NPLs) easing to 13 percent from 13.1 percent in April supported largely by new loan payments and loan restructures which hit Ksh.680 billion.

Overall inflation is meanwhile expected to remain within the target range of 2.2 to 7.5 percent anchored by lower oil prices, the reduction of VAT and muted demand pressures.

The new developments saw the CBK retain its benchmark lending rate at seven percent on Thursday noting recent monetary and fiscal measures continue having the intended effect on the economy.