Connect with us

Hi, what are you looking for?

Capital Business
Capital Business

Kenya

Weak credit growth to lower Kenya’s economic activity – WB

“As a consequence, we do not expect credit growth to reach its long-term average in the near term,” reads the report/FILE

NAIROBI, Kenya, May 2 – The weakness in credit growth to the private sector will dampen Kenya’s economic activity.

This is according to the World Bank, in its latest edition of the country’s Economic Update.

The WB report says that as a result of the implementation of the 2016 Banking Amendment Bill which capped bank interest rates at 4 percent, Kenya’s credit growth is hovering at a 13 year low of 4.3 per cent, compared to the 10 year average of about 19 per cent.

“As a consequence, we do not expect credit growth to reach its long-term average in the near term,” reads the report.

It, therefore, anticipates sectors that have traditionally been intensive in the use of bank loans to be hit the hardest.

As such, durable household purchases such as cars and houses, and firms in manufacturing, construction and real estate industries, will restrain domestic demand and Kenya’s growth prospects.

Weak credit growth is not the only factor expected to reduce the country’s economic activity. The expected increase in oil prices will dampen the GDP growth by some 0.35 per cent and increase inflation by 2.5 per cent over 10 quarter periods.

“With global oil prices set to rise on recent agreements between major oil exporters, the positive terms of trade effect that Kenya and several other oil importers have enjoyed will be curtailed.”

The World Bank projects oil prices to reach US$60 per barrel in 2019, which represents a steady increase in prices, so should be able to be absorbed by the Kenyan economy as opposed to the destabilising sharp hike in oil prices that occurred in 2011/2012.

Advertisement. Scroll to continue reading.
Click to comment
Advertisement

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Ask Kirubi

It is without a doubt that the COVID-19 pandemic has caught the whole world by surprise. Although its full impact is yet to be...

Headlines

NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...

Kenya

NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...

Coronavirus

NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...

Coronavirus

NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...