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Economists see brighter Kenya this year

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Isuzu East Africa Vehicle Assembly
Isuzu East Africa Vehicle Assembly plant staff at work as seen during a media tour along Mombasa Road on December 6, 2018. A good number of economists and analysts project a bright 2019 for Kenya. PHOTO | DIANA NGILA | NMG 

World’s leading banks, consultancies and think-tanks see the Kenyan economy expanding by 5.8 percent this year, unchanged from 2018’s estimated growth, sustained largely by increased private sector investments and consumption.

Heavy rains in the second quarter of 2018 and the March 9 truce between President Uhuru Kenyatta and opposition chief Raila Odinga – popularly known as the hand shake – likely lifted growth from a five-year low, economists have said.

A consensus growth outlook from 14 global firms indicate the country’s economy will expand at the same pace as 2018, with subdued performance in private sector credit and increased debt repayments posing downside risks to the outlook.

Researchers at FocusEconomics, a Barcelona-based economic forecast and analysis firm that compiles global forecast data on sub-Saharan Africa, say the economy likely sustained a solid pace of growth in the final quarter of 2018.

This is despite implementation of the eight percent value added tax (VAT) on petroleum products from September 21 and increased charges for electricity, which raised the cost of some basic goods, hurting household incomes.

Diesel, used to power farm and industrial machines as well as in public transportation, for example cost an average of Sh108.97 per litre last November as a result of the VAT, 16.71 per cent more than a year earlier.

Households consuming 200 units of electricity, on the other hand, paid Sh4,434.48 in November, a 12.63 per cent increment compared with 12 months before.

“Private sector activity seems to have expanded robustly in October and November, despite losing some momentum from H1 (first half), while the arrival of the short rainy season likely boosted agricultural and hydro-powered electricity output,” they wrote in their latest report on sub-Saharan Africa.

“Growth momentum will likely be sustained in 2019, as healthy remittance inflows and a tighter labour market drive solid private consumption, while upbeat business confidence fuels a strong expansion in fixed investment.”

A higher growth means increased economic activities, which creates job opportunities for the rising population of unemployed graduate youth and raise revenue collection for the government.

Washington-headquartered Frontier Strategy is projecting the highest growth for Kenya in 2019 at 6.8 percent while New York-based Fitch Solutions sees the country clocking 5.2 percent – the slowest growth among firms surveyed.

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US brokerage house Citigroup Global Markets and France’s giant lender PNB Paribas – the world’s eighth largest bank by assets – are both forecasting a 6.1 percent growth for Kenya.

London-headquartered Euromonitor International sees six percent growth, while Economist Intelligence Unit and Goldman Sachs each project a 5.8 percent expansion.

Others are JPMorgan, France-based credit insurer Euler Hermes and Oxford Economics, which are all projecting Kenya’s economy to expand by 5.7 percent and Standard Chartered of London (5.6 percent).

Economic research consultancy firm Capital Economics of UK and Swiss lender Julius Baer Group, on the other hand, have forecast a growth of 5.5 percent, while world’s largest lender HSBC sees Kenya’s economy growing 5.4 percent.

“Recent activity data suggests that Kenya’s economy remained strong in recent months. After jumping in September due to tax changes, inflation stabilised in October and November.

“We expect that the Central Bank of Kenya will keep its key rate on hold in 2019,” economists at Capital Economics said in a note on December 20.

The economy last year recovered from 2017’s twin shocks of biting drought in the first half of last year, which hit farming activities hardest, and elevated political uncertainties following a bruising presidential contest that put on hold many investment decisions.

Kenya posted a solid growth of 6.3 percent in the April-June period of 2018 largely buoyed by good rains earlier in the year.

But expansion is estimated to have slowed in the third quarter (July-September) due to uncertainty among investors as a result of new taxation measures, before recovering again in the final quarter.

The consensus growth outlook from the 14 firms is, however, lower than Treasury, International Monetary Fund and World Bank Group’s projections of 6.2, 6.1 and 6.2 percent, respectively.

“However, the prevalence of the interest rate cap will likely continue to limit the availability of credit and could hinder the government’s ability to secure additional funding from the IMF. This, coupled with fiscal tightening measures, pose headwinds to the outlook,” FocusEconomics analysts said in the report.

Another risk to economic growth is increased expenditure on debt repayments which eats into development budget.

Treasury data shows nearly Sh254.17 billion was spend on servicing debt in five months through November, nearly three times the Sh88.35 billion channeled into development projects overseen by State ministries, departments and agencies in the period.

“One concern we have over Kenya’s debt is the impact of a one-off shock (i.e. a drought or currency devaluation) which could cause either growth to slow sharply (to around one-two per cent) or the servicing costs on debt denominated in foreign currency to increase.

“Kenya costs are particularly vulnerable to the effects of an external shock due to their high current account deficit,” Capital Economics analysts said.

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World Bank pushes G-20 to extend debt relief to 2021

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World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.

“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.

He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.

The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.

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People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.

For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.

Debt burdens, already unsustainable for many countries, are rising to crisis levels.

“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.

“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”

According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.

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Tighter Reins on Platforms for Mobile Loans

The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.

Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.

Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options. 

This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.

The Scope Markets app offers clients over 500 investment opportunities across global financial markets.

The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.

The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).

The platform also offers an enhanced client interface including catering for those who trade at night.

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The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour;  Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).

The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.

Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”

He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.

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