Central Bank of Kenya forecasts East Africa's biggest economy would grow by 6.2 pct in 2018 from current 4.9 pct

On Tuesday, during Monetary Policy committee (MPC) meeting to review the outcomes of its policy decisions and recent economic development, CBK governor, Patrick Njoroge forecasted the country’s economic growth would speed up to 6.2 per cent in 2018 despite the interest rate cap holding back the economy.

“The interest rate cap has been acting as a brake to the economy,” Njoroge said on Tuesday.

This number could however rise even higher in the event of a supportive fiscal policy by the government.

Njoroge told reporters in Nairobi that the forecast could go higher in the event of a supportive fiscal policy.

“If we have favourable policies, we will have a stronger outcome for the economy” he added.

The World Bank cut its 2017 growth estimate for Kenya’s economy to 4.9 percent in December 2017, the slowest annual expansion in five years, due to drought, sluggish credit growth and a prolonged election season.

The Central bank is betting on the private sector which grew by 2.4 percent in the 12 months to December, slightly higher than the 2.0 percent in October 2017 to spur economic growth.

“The economy is expected to pick up strongly in 2018 supported by a stable macroeconomic environment, a resurgent private sector, recovery in agriculture and sustained public investments in infrastructure”

Sectors expected to flourish in 2018 include manufacturing, domestic trade and real estate which grew by 13.0 percent. 10.5 percent and 8.6 percent respectively.

The MPC private Sector Market Perception Survey conducted in January 2018 showed an upsurge in optimism by the private sector for the economic prospects of 2018.

More than 90 percent of the respondents were optimistic about prospects for 2018, compared to 65 percent in November 2017.

Despite assaults by the government, the Banking sector remains stable and resilient. Average commercial banks liquidity and capital adequacy ratios stood at 43.7 percent and 18 percent respectively.

Global affairs outside the control of Kenya may however take a hit at Kenya’s economy in 2018.

The US economic policies, the post-Brexit resolution and the pace of monetary policy normalization in advanced economies may affect kenya’s economic recovery in 2018.