カントリーリスク評価
Kenya

Kenya

Population 42.9 million
GDP 1,420 US$
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Synthesis

major macro economic indicators

  2013  2014 2015 (f) 2016 (f)
GDP growth (%) 5.7 5.3 5.6 6.0
Inflation (yearly average) (%) 5.7  6.9 6.3 5.9
Budget balance (% GDP)  -5.7  -7.2 -8.1 -7.3
Current account balance (% GDP)  -8.9  -10.4 -9.6 -9.2
Public debt (% GDP)  44.2 52.6 56.2 55.9

 

(f) Forecast

STRENGTHS

  • Leading East African economy
  • Pivotal role within the East African Community, the leading African common market
  • Diversified agriculture
  • Performance of telecommunication and financial services
  • Dynamic demographics and emerging middle class

WEAKNESSES

  • Agriculture production highly dependent on climate conditions
  • Lack of sufficient infrastructure
  • Significant terrorist risk
  • Improving governance, but persistent corruption

RISK ASSESSMENT

Growth still dynamic, buoyed by private consumption and public investment

Growth remained buoyant in 2015 despite a lack of rain and another fall in the number of tourists. Activity was driven by private consumption, which benefited from lower oil prices, job creation and public investment in infrastructure (including the construction of a railway line and new geothermal electricity plants). Meanwhile, on the supply side, the services sector, driven by telecommunications and financial services, was still one of the most dynamic of the continent. In 2016, growth is expected to continue to benefit from the rise in development spending, but will be less dynamic than initially expected. Heightened volatility on the world markets and terrorist attacks have led the authorities to revise the macro-economic prospects of their programme downwards (this benefitted from IMF support under two credit arrangements approved in February 2015 as a precautionary measure). Downside risks continue to put pressure on this new growth scenario. A sharper deterioration in financial conditions (linked to the normalisation of monetary policy in the United States) or economic conditions in Europe (major market for tourism) would affect activity. The same would be true if FDIs in oil exploration were to slow due to the oil market slump.
In the medium term, the authorities expect the planned expansion in transport and irrigation network infrastructure, as well as the establishment of alternative energy sources, to lead to a significant expansion in trade and less vulnerability to weather conditions, as the country depends heavily on hydroelectric energy and rain-fed agriculture. In 2015, Kenya made progress regarding the business climate, simplifying procedures to start up a new business and to register property, and to improve access to credit and electricity.
Inflation remains within the authorities' target range. Higher food prices at the start of the year, and the depreciation of the shilling prompted the central bank to raise interest rates twice in 2015.

 

The country is running significant twin deficits linked to its great need for infrastructure

The trade deficit remains large due to the substantial growth in imports of capital goods associated with infrastructure modernisation and oil exploration. Moreover, although diminishing, the energy bill remains high. Only a strong expansion in the geothermal sector and the start of oilfield operations will enable it to be reduced in a few years. Exports are expected to continue to rise in 2016 thanks to robust prices for tea, of which the country is the third largest producer and the leading exporter in the world, and the recovery in sales of horticulture products (2nd leading export item). As for invisibles, tourism income is down but remittances by expatriate workers continue to grow. Thanks to the rise in FDIs, foreign exchange reserves grew until 2014, since when capital flows have, nonetheless, been on a slowing trend, in a context of greater volatility on world markets. However, reserve levels remain satisfactory.
The budget deficit is also high due to the investment in infrastructure. Expenditure (construction of the railway line, security, transfers to the counties and support for the national airline) rose substantially in the 2014/15 fiscal year. Higher excise duty and improved tax administration should help contain the deficit in the 2015/16 fiscal year. Public debt rose markedly in 2014, pushed up by the issuance of sovereign bonds and the drawing down of a credit line awarded by China, although its sustainability is not in question.

 

The security risk remains high

The adoption of a new constitution in 2010 and the peaceful conduct of the 2013 general election have improved the outlook for political stability. President Kenyatta should be able to serve a full term. He could even stand again in August 2017, especially as the International Criminal Court has dropped its charges against him in connection with the inter-ethnic violence following the December 2007 presidential election.

The country is still in the grips of significant insecurity following the murderous attacks perpetrated by the Islamic Al-Shabaab group in September 2013 (Westgate shopping centre in Nairobi) and in April 2015 (Garissa university), presented by this group as revenge for the operations carried out in Somalia by the Kenyan army.

 

Last update : January 2016

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