Experts predict boom in second quarter of 2013

October 15, 2013
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This is attributed to favoured inflation risks, acceleration in private credit sector borrowing, the impact of devolved funds and a positive impact from the short rains season on agricultural regions and incomes/FILE
This is attributed to favoured inflation risks, acceleration in private credit sector borrowing, the impact of devolved funds and a positive impact from the short rains season on agricultural regions and incomes/FILE
NAIROBI, Kenya, Oct 15 – Kenya is set to experience an economic boom between October and December, compared to the first quarter of the 2013/2014 financial year, according to experts at Old Mutual Asset Managers (OMAM).

This is attributed to favoured inflation risks, acceleration in private credit sector borrowing, the impact of devolved funds and a positive impact from the short rains season on agricultural regions and incomes.

Old Mutual Kenya Chief Investment Officer Peter Anderson said that agriculture is expected to continue performing well given that the short rains season outlook is forecast to be near normal for most agricultural regions and the sector was expected to be one of the better performing ones.

“Its overall impact on economic growth would be significant this year in attaining growth above five percent, given last year that agriculture underperformed due to weather conditions and resultant overall growth was sub-par,” he said.

Anderson said the impact of falling commercial bank rates has been expressed in an uptake in private sector borrowing that bodes well for economic growth in the coming periods.

“The financial services sector continues to be a key component and driver of economic growth with the extension of loans at interest rates significantly lower than last year,” he said.

He added that the release of devolved funds would be positive for growth in the second half as counties looked to provide services and the impact of funds released would spur business and consumption growth.

On the macroeconomic front, Anderson remarked that there were no material risks seen that would cause inflation to rise rapidly and expected the inflationary impact of VAT implementation to recede over the coming months.

“With the absence of very strong demand side pressures and limited supply side pressure from food and oil prices, complemented with a relative stable currency, the current monetary policy stance taken by the Central Bank of Kenya is expected to be maintained into 2014,” he said.

OMAM forecast a growth of 5.25 percent for 2013 and looking further out into 2014, the expectation was for higher growth particularly if continued stability in macroeconomic could be attained.

“Opportunities vis-a-vis the risks for domestic and foreign investors continued to be attractive and the successful issue of the Eurobond would further cement Kenya’s position on the radar for flows into the capital markets and for private sector investment across multiple industries and sectors,” he explained.

He cautioned investors to seek professional advice to ensure that their return aspirations complemented the level of risk that they could withstand.

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