NAIROBI, Kenya, Apr 19 – Improved rains and a bumper harvest are expected to help double Kenya’s economic growth in the second quarter of 2010.
Gross Domestic Product (GDP) for the second quarter of 2009 stood at 2.1 percent, while indications from experts suggest that this could rise to four percent.
Speaking while releasing a quarterly economic survey on Monday, CFC Stanbic Financial services Head of Research Judd Murigi said the rebound in Q2 would be largely attributed to a turnaround in the agricultural sector, which was affected in 2009 by drought.
“With agriculture comprising 23 percent of our GDP, we think that the rains and subsequent harvest will significantly impact in the overall GDP growth in the second quarter this year,” Mr Murigi said.
The report however indicates that the abundant harvest could present a challenge with the depressed commodity prices due to oversupply and lack of market for the produce.
“The government should address this challenge by ensuring farmers produce is able to reach internal and external markets,” the researcher said.
2010 projections put the growth at between three to four percent as the economy continues to strengthen. Kenya’s GDP reduced to 1.7 percent in 2008 from the 7.1 percent achieved in 2007 and subsequently rose to 2.5 percent in 2009.
The report also indicated increased activity at the stock market, with greater participation expected from retail investors.
In the first quarter of 2010, the NSE 20 Share Index and NSE All Share Index were up 24.89 percent and 17.44 percent respectively, making the NSE the best performing top ranked African equity market for Q1 of 2010.
Market capitalisation was up 17.44 percent for the first quarter and hit the Sh1 trillion mark in April.
“Following that the NSE (20 Share Index) reached 4,000 points, we now think that the index is trading 4,500 to 5,000 points. We think the index could be trading at these levels in the coming few months,” he said.
The outlook predicts that yields on government securities will continue to decline with Treasury bills trading in the four to five percent range in the next two months.
On monetary and fiscal policy, Mr Murigi expects the Central Bank to continue with an expansionary monetary policy in an attempt to boost the economy.