Kenya’s Gross Domestic Product (GDP) is expected to grow by 5.8% in 2021, according to the latest NCBA Regional Economic Outlook Report.

The growth forecast is supported by an evolution of the public health crisis that continues to support quicker softening of mobility restrictions.

NCBA projects GDP growth to remain above trend at 5.2% in 2022, driven by the continued release of earlier held up demand.

According to the report, trade, real estate, health care and financial services are all expected to revert to historical growth trends. Manufacturing could also emerge stronger as companies rebuild inventory in response to growing demand.

The sectors hardest hit by the pandemic such as accommodation, education, trade, and transport are projected to maintain above trend growth as the economy “normalizes”. These sectors have grown to contribute more to GDP after the rebasing of national accounts.

The NCBA report further revealed that disruptions to agriculture has been moderate although harsh weather could keep growth below the historical average. Economic growth sensitivity to agriculture has reduced after the recent shift of the economy. The sector now contributes about 23% to Gross Domestic Product (GDP), a marked decline from 33%, prior to the shift.

Furthermore, NCBA expects credit markets to continue to suffer from lagged effects of interest rate capping and increased credit risk resulting from the pandemic. The proliferation of unregulated mobile lenders is also expected to challenge the conduct of monetary policy, as the market moves from the formal intermediation channels.

In terms of remedies, ongoing reforms at state owned enterprises could also present further strain on the sovereign which may have to accommodate some more debt or inject some funding to stabilize them.

Whereas the progress has been encouraging, NCBA warns risks could still stem from the treatment of public guaranteed debts as well as the overall discipline in the administration of public finances.

Speaking at the NCBA Economic Forum, Group Managing Director, John Gachora noted that, “The transition to normalcy that began in late 2020 will continue as public and business anxiety over the virus wanes and stringent containment measures begin to diminish. Concerns over the uncertainty presented by the 2022 elections cannot be gainsaid. However, recent election cycles suggests that sentiment around elections and investments could be overdone.”