Experts are projecting an estimated average growth of 5.5 percent on Kenya’s economy in 2019.
This growth according to economic experts still represents a robust expansion in the country’s economy and is double the average growth rate of Sub-Saharan Africa economies.
According to ICEA LION Asset Management forecast of the economic performance of 2019, the economy will normalize back to the sub 6 percent levels that were prevalent over the last economic cycle.
Speaking at a press conference in Nairobi last week, ICEA LION Asset Management’s Head of research Judd Murigi noted that the strong GDP growth witnessed in the first three quarters of 2018 were driven by a rebound in the two largest sectors of the economy, namely - manufacturing and agriculture.
“Over the last five-year cycle, manufacturing and Agriculture sectors have the weakest showing in the fourth quarter,” this Murigi said He holds the opinion that that strong showing in 2018 was partly driven by a low base in 2017 , as well as the tendency for agriculture and manufacturing to have alternating years of strong and moderate growth over the last economic cycle.
Murigi stated that comparatively, Uganda maintained a flat rate of 6.1 percent in the first nine months of 2018 while Rwanda GDP grew to over 8 percent due to the trade, Manufacturing and construction sectors.
However, in 2019 in Rwanda, the growth could decline sharply towards the 7 percent range.
The researcher noted that GDP growth has a more consistent relationship with profit declines.
According to Murigi, major reductions in the number of profit warnings occurred in high GDP growth years such as 2013, 2016 and 2018, while profit warnings rose when GDP growth slowed in 2014 and 2017.
Companies in the financial services, Manufacturing, and trade sectors had the highest number of profit warnings over the last economic cycle.
“East Africa economics should continue to be high growth economies in 2019. However, the slowdown in the global economy requires the company to aggressively manage their key profitability drivers,” said ICEA LION Asset Management CEO Einstein Kihanda.
Despite the expected good showing, the Kenya National Chamber of Commerce and Industry (KNCCI) is warning that premature 2022 succession politics could hamper the country’s economic growth.
“An unstable political environment may reduce investment and pace of economic development while poor economic performance may lead to government collapse and political unrest,” KNCCI National Chairman Kiprono Kittony said.