Cytonn projects Kenya’s economy to grow by 4.5 per cent

NAIROBI, Kenya, Jan 24 -Kenya’s economy has been projected to grow at an average of 4.5 percent in 2022, supported by the continued recovery of businesses from the adverse effects of the pandemic, according to the Cytonn 2022 markets outlook.

The projection which was a downgrade from the 5.9 percent was attributed to the erratic weather affecting agricultural produce and the August 2022 general elections

“Our projection is however lower than the 5.9 percent estimated growth for 2021 given the erratic weather affecting our agricultural produce and the August 2022 general elections which risks destabilizing the Macro Economic environment,” Said Ann Wacera, a Senior Investments Analyst at Cytonn.

The investors at Cytonn expect the inflation rate to remain within the government’s target of 2.5 -7.5 percent and come in at an average of 6.3 percent.

They however noted that the rising global crude oil prices would continue putting pressure on the inflation rate

As for the Kenya shilling, they project it to trade within the range of between Sh112.0 and Sh117.0 against the USD in 2022, driven by the increased global crude oil prices that could lead to increased dollar demand from oil and energy importers.

“In the short term, the Monetary Policy Committee (MPC) is projected to maintain the accommodative policy stance taken in 2020 to support the economy from the adverse effects of the pandemic,” Cytonn noted.

The MPC has maintained the CBR at 7.00 percent since April 2020 following a cumulative 125 basis points cut, from 8.25 percent in January 2020.

Further, Cytonn’s outlook for 2022 is negative on government borrowing.

“We expect the government to borrow aggressively from both the domestic and foreign markets as it aims to plug in the fiscal deficit, which is projected to come in at Sh1.4 trillion in the FY’2021/22 equivalent to 11.4 per cent of the GDP. On revenue collection, we expect continued improvement in 2022 due to the relatively more conducive business environment,” Cytonn said.