Kenyan central bank cuts 2020 growth outlook as coronavirus hits home

NAIROBI: Kenya's central bank cut its forecast for 2020, economic growth by more than half on Friday, joining the Treasury in realising that the coronavirus had inflicted more damage to the economy than previously thought.

Finance Minister Ukur Yatani said on Wednesday he expected expansion of only 0.6pc for this year, down from an earlier forecast of 2.5pc.

That's still more optimistic than the World Bank's outlook, which forecasts a contraction of 1pc to 1.5pc.

Like other economies around the world, Kenya's tourism, education and other key sectors have been pummelled by the COVID-19 pandemic.

The central bank now expects growth of 1.3pc, down from its September forecast of 3.1pc, bank governor Patrick Njoroge told an online news conference.

The bank's prediction was derived from updated information on output in sectors like farming and manufacturing that it expects the statistics office will eventually reflect, he said.

Njoroge, who led policymakers in holding the benchmark lending rate unchanged for the fifth time in a row on Thursday, said a benign outlook for the current account deficit, driven by a rebound in exports, will support the exchange rate.

The shilling weakened to a record low of 110.00/30 in early trading on Friday.

Kenya is in discussions with the International Monetary Fund for a budget lending programme, which the Treasury put at $2.3 billion on Monday.

Njoroge said they were still assessing the potential impact of seeking suspension of debt payments under the G20's Debt Service Suspension Initiative (DSSI), aimed at helping poor countries weather the COVID-19 pandemic.

"We need to look at it in the context of what is good for the country and look at the various risks and benefits and weigh them as we go into this," he said.

Kenya's total debt jumped to 65.6pc of gross domestic product in June this year from 62.4pc a year earlier, the World Bank said on Wednesday.

"It is currently sustainable, but we need to move away from the dangerous sort of margins, closer to the edge of the table, and more to the middle where we should be," Njoroge said.