Consumer driven growth and low commodity prices are driving Kenya’s GDP growth according to a new report released on Tuesday by the Institute of Chartered in England and Wales (ICAEW).
According to the report, most East African countries have a positive outlook, largely due to the right kind of performance brought about by economic diversification.
The professional accountancy body provides GDP growth forecasts for various regions including East Africa which is set to grow by 6.1 percent, compared to West and Central Africa at 3.7 percent, Franc Zone at 4.9 percent, and Southern Africa at 2.2 percent.
The ICAEW report, produced in partnership with forecaster Oxford Economics, states that East Africa’s growth has been reinforced by low commodity prices, which have kept inflation at bay, providing a strong base for continued GDP growth.
This growth comes against the backdrop of a slowing global economy impacted by the US Federal Reserve implementing ‘insurance’ interest rate cuts due to growth concerns, as well as slowing GDP growth in China.
Michael Armstrong, ICAEW’s Regional Director for the Middle East, Africa and South Asia, said that Kenya’s economic diversification has played a key role in keeping the country’s growth rate higher than its continental counterparts.
“Growth in Kenya is currently driven mostly by the consumption model; however, its strong service industry provides an opportunity to diversify and increase growth avenues for the economy in general,” said Mr. Armstrong.
“This growth is also reinforced by falling global commodity prices which at the moment form a huge part of the prices of basic goods,” he added.
The report also highlights how the drive to renationalise Kenya Airways, the national carrier, may see the organisation make the most of growing tourist arrivals to the country.
“In addition to shoring up the airline’s balance sheet, nationalisation will exempt Kenya Airways from taxes on engines, maintenance and fuel,” the report states.
This solution however has its doubters who view it as an unsustainable move.
“The move will undoubtedly improve the company’s financial position over the short term, but there is a lot of uncertainty over whether increased government involvement will actually benefit Kenya Airways’ longer-term sustainability, especially when considering that most other airlines are moving away from nationalisation, towards privatisation,” the report states.
A large number of passengers are set to pass through Kenya in the coming years, with the International Air Travel Association (IATA) projecting that total air passengers through Kenya will increase from 6.8m in 2018 to over 10m by 2026, notes the report.
According to the report, the Ethiopian Airlines is the only profitable airline in sub-Saharan Africa and is increasingly acquiring shares in smaller carriers on the continent in an effort to become the powerhouse pan-African airline.
JK/as/APA