The Bank’s Chief Economist for Africa, Razia Khan, says interest rates will remain relatively stable in the medium term and will be begin to drop in the second half of 2016.
Khan, who spoke to the press in Nairobi, foresees Kenya’s currency to depreciate further against the dollar and could hit the Sh110 mark.
“The United States Federal Reserve will raise its rates about four times; this will definitely affect the Kenya shilling. However, we are of the view that they will begin to bring down towards the end of 2016 due to concerns of the environment,” Khan said.
She says the current slowdown of growth in China will have no effect on Kenya as only one percent of Kenya’s exports go to China.
The current drop in oil prices, Khan says, will delay the start for Kenya to produce oil but will benefit the current account deficit as it will reduce the imports bill.
International crude oil prices fell below 30 dollars a barrel for the first time since December 2003. The latest prices have crude oil down 19 percent this year alone and a 72 percent plunge from crude oil’s June 2014 peak of almost $108.
“However the rising investment spending will offset the gains made by lower import bills; Kenya needs to focus in increasing its exports,” she explained.
She also says that the business environment in the country is cautiously optimistic in 2016, despite the pre- election year.
“Elections are not a risk factor just yet, the business environment seems confident and will continue to invest,” she concluded.
Earlier, Cytonn Investments predicted 2016 growth to be between 5.5 percent and six percent, while PineBridge Investments see the growth to be above 5 percent.