Moody's assigns positive outlook for Kenya's economy

British-based global ratings agency Moody’s has given Kenya’s economy a positive outlook based on its growth trend.

Thursday March 24 2016

A man samples second-hand clothes (locally known as mitumba) at the Gikomba open-air market on June 25, 2012, in Nairobi.

A man samples second-hand clothes (locally known as mitumba) at the Gikomba open-air market on June 25, 2012, in Nairobi. Photo/AFP 

By EDWIN OKOTH
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British-based global ratings agency Moody’s has given Kenya’s economy a positive outlook based on its growth trend, stability as well as its future and fiscal trajectory.

According to the agency’s latest report, the country’s infrastructure push and rapidly expanding services underpin one of the strongest growth rates in sub-Saharan Africa over the past two years.

Kenya’s household consumption is expected to remain a key driver of growth, supported by increased urbanisation and a sizable middle class that is also behind the booming housing market.

Withdrawal of travel advisories by some key countries and low oil prices have also been important supporters of this economic positive that Moody’s believe can be sustained.

SUPPORTIVE DYNAMICS

“Kenya’s growth prospects for 2016 and onwards remain strong. Recent growth has included a steady increase in productivity, particularly in the services sector, which we believe will be sustained in the coming years. Moreover, Kenya has supportive demographic dynamics that will contribute to longer term growth,” the firm noted in its report.

The country is also said to be best positioned to benefit from growth of other East African economies thanks to its dominant position in the region.

The nation’s fiscal sustainability is also seen as stable since the public sector debt (at 49 per cent of GDP) remains sustainable, and the future growth dividend associated with public infrastructure investment will help lower debt ratios.

As other frontier and emerging markets continue to experience periodic episodes of capital outflows, Kenya’s current account deficit is expected to narrow from 9.5 per cent of GDP in 2015 to around 6.7 per cent of GDP over the next three years, supported by the positive terms of trade and the decline in capital imports related to infrastructure projects.

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