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Kenya central bank lowers 2023 growth forecast to 5.5%

Kenya’s central bank has lowered its economic growth projection for this year to 5.5%, a presentation by the bank’s governor Patrick Njoroge showed on Wednesday.

The bank had said in March that the economy would expand by 5.8%. Njoroge did not address the new forecast. The economy expanded by 4.8% last year, lower than the pace of expansion in 2021, weighed on by a contraction in the agriculture sector.

Njoroge, who will leave the post mid-next month after eight years, said he expected the farming sector to rebound strongly due to the base effects of last year’s contraction, and adequate rainfall across the country.

Agriculture accounts for more than a fifth of economic output in the East African nation. Tourism, which is another key sector, is reporting good forward bookings, the governor said, pointing to a strong performance in the months ahead.

But the outlook faced several risks, he said, citing a survey of businesses carried out by the bank, including proposed increases in various taxes by the government, higher costs of electricity and a weakening Kenyan shilling.

The central bank expects the foreign exchange rate to stabilise over time, said Njoroge, whose successor is currently being vetted by parliament.

He cited various measures taken by authorities, including the revival of the interbank foreign exchange market from March this year.

The collapse of the interbank currency market had been partly blamed for a shortage of dollars, which in turn had fuelled a steep weakening of the shilling against the dollar.

Its revival has already started to pay off, Njoroge said, with foreign exchange trades converging towards the interbank rate, which will support stability in time.

“The river will be returning back to its course,” he said.

Source: Reuters