Kenya’s economy to grow by 6% this year, says a report.

Kenya’s economy to grow by 6% this year, says a report.

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A recent finding by Oxford Group reveals that Kenya’s economic performance was impressive despite occurrence of market forces that stunted the economy.

The country’s economy performed comparatively strongly in 2015 amid a depreciating shilling, even slow growth in Europe, and other domestic hurdles including weaker tourism receipts.

Oxford Group is optimistic that Kenya’s growth will be registered at 6% in 2016 and that this would be catapulted primarily by continued infrastructure expenditures for projects such as the $25 Billion Lamu Port-Southern Sudan-Ethiopia Transport (LAPSSET) corridor.

Among this year’s planned investments is Kenya’s flagship project for the Vision 2030 development programme, the majority-Chinese-funded Standard Gauge Railway, which will connect the nation’s main port in Mombasa to the capital Nairobi, further easing the flow of goods in the region.

With 60% of the project’s 608 Kilometers first phase complete as of mid-December, plans to extend the railway to Malaba, on the border with neighboring Uganda, are under way.

One of Kenya’s key earners, agricultural sector is projected to grow in 2016 as a result of strong rains while recovery in the tourism industry is also expected to drive growth.

Tourist population is deemed to grow after the US and UK lifting travel bans.

Once the country’s highest foreign exchange earner, the tourism sector has plunged in recent years following a spate of security incidents over the past two years that led many foreign governments to issue travel advisories urging their citizens to avoid the East African nation.

International tourist arrivals fell by 18.4% year-on-year between January and August 2015.

To fund the country’s capital investments, the government continues to borrow from international debt markets – including a $597 Million syndicated loan from international financiers in November – and has been working to boost domestic revenue collection.

However, revenue collection between July and September reached only KSh 277.2 Billion ($2.71bn) against expenditures of KSh 337.4 Billion ($3.3bn). This caused a cash crunch, forcing the government to turn to domestic markets to raise funds.

Significant government borrowing from local markets in September and October caused interest rates to rise rapidly. The rate on one-year Treasury bills jumped to 22.4% in October, as investors demanded higher premiums on government loans.

Rates have since normalized to around 12.5%, but if revenue collection remains weak, liquidity levels could be affected further in the New Year. Heavy borrowing in 2015 also pushed up the country’s debt-to-GDP ratio, which stood at around 54% as of end-November, up from 52.8% in June.

The US Federal Reserve’s mid-December interest rate hike could also have an impact on Kenya.

The strengthening US dollar has contributed to the shilling’s 11.5% depreciation in 2015, which in turn could have implications for Kenya’s growing dollar-denominated foreign debt, which amounts to 59% of the total, according to the Budget Office.

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