Companies are advised to revisit their assumptions and goals for Kenya to ensure they reflect the market’s upbeat growth dynamics in 2022. This will necessitate reviewing the suitability of their product portfolios and ensuring local partners have the capabilities to capture strong demand growth. MNCs selling to the public sector should, however, plan for constrained demand growth for the foreseeable future, while companies operating in all industries should plan for higher tax bills. Additionally, MNCs must prepare for a short period of operational disruption and a slump in demand following the August 2022 election.
Latest data releases indicate GDP growth accelerated to 10.1% YOY in Q2 2021, the fastest rate since at least 2004. Most industries recorded sharp expansions, including education (+67.6% YOY), ICT (+25.2% YOY), mining (+17.7% YOY), professional services (+17.6% YOY), transport and storage (+16.9.% YOY), and manufacturing (+9.6% YOY). The only industry to contract was agriculture (-0.9% YOY), although this was due to inclement weather.
Strong GDP growth was partly a statistical effect caused by the pandemic-induced slump in Q2 2020, but the scale and broad-based nature of the upswing suggest a sustained recovery is underway. GDP growth of 4.9% YOY is forecast for 2021, rising to 5.2% YOY in 2022. This will be driven by robust export revenues, upbeat private sector sentiment underpinned by strong credit growth, and strong hiring trends that will support consumer spending. However, mounting fiscal pressures spell delays to publicly funded infrastructure projects and goods and services procurement. Furthermore, the recent collapse of President Uhuru Kenyatta’s Building Bridges Initiative (a key constitutional overhaul) has made the outcome of the August 2022 election much more ambiguous, substantially increasing the risk of post-election violence in the event of a close result.
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