Economy projected to grow by 4 per cent

By Macharia Kamau

The economy will grow by between three and four per cent this year, with a sustained growth in the services sector expected to steer it towards full recovery.

Erratic weather and political instability have, however, been cited as major challenges that might hinder a full recovery.

Analysts at CFC Stanbic Financial Services said the growth would be hinged on performance of service sectors, with tourism, transport and communications tipped to be key industries this year.

Other sectors expected to play a key role in the economic recovery are real estate and construction, banking, wholesale and retail trade.

"Tourism, transport and communications and wholesale and retail trade are expected to grow at more than the GDP growth rate, while manufacturing is likely to match or slightly exceed GDP growth," said Judd Murigi head of research at CFC Stanbic Financial services.

Murigi, who spoke yesterday when the firm presented its quarterly economic and market outlook in Nairobi, also said there would be increased activity at the Nairobi Stock Exchange, following a renewed interest by local and foreign investors.

The market has been depressed over the last two years, with some stocks going down by as much as 60 per cent. It has, however, been on a bull run since the market opened for trade this year and the market capitalisation gone up to more than Sh900 billion.

"We expect to see the current market rally persisting throughout the year and the 20-share index approaching and possibly exceeding 4,000 points by end of this year," said Murigi

overall inflation

He added that overall inflation would drop further.

"Yields and interest rates, still relatively high, are also expected to reduce during the first half of this year."

The local currency is expected to stay stable or gain against major world currencies, following increased inflows from foreign investors and Kenyans abroad.

"The shilling is expected to get the support of foreign investors as well as diaspora remittances, but the strengthening of the dollar could test the local currency unit," said Murigi.

The situation is, however, not all rosy for agriculture, where the firm expects a decline in tea earnings, a major foreign exchange earner.

"While tea output is expected to increase, market prices for the beverage are likely to fall," said Murigi.