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Select Economic and Financial Indicators2014201520162017e2018f
Real GDP (% change)
GDP (USD bn)61.564.070.577.686.0
Inflation (average)
Fiscal Balance (% GDP)-7.4-8.1-8.7-8.4-6.6
Broad Money (% change, end period)16.714.
Population (mn)43.0044.2045.4546.7348.03
Exports (USD bn)11.210.610.311.212.0
Imports (USD bn)20.317.716.518.320.4
Current Account Balance (% GDP)-10.4-6.8-5.2-6.2-6.0
FX Reserves (USD bn, end period)
Exchange Rate (average)88.098.2101.5103.5104.4
Sources: IMF, World Bank, UN, Bloomberg, Ecobank Research

Economic Outlook

Economic Outlook

Real GDP: Growth is likely to slow in 2017 largely due to a slowdown in agriculture (24% of GDP) following a drought in H1 2017, which adversely affected food crop production. In addition, completion of the first phase of the Standard Gauge Railway (SGR) project will drive a deceleration in growth in the construction and transport sectors. Further headwinds to growth emanate from the interest rate cap, which has been in place since September 2016, weakening banks’ lending activity (the value of loan applications has already declined), and hence financial sector GDP. However, improved exports, alongside higher government spending associated with election-related activities and development of regional trade channels under the USD26bn Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) Corridor will help to compensate for the slowdown alluded to above helping to sustain growth above 4% during the year. In 2018, we expect improved weather conditions to drive a recovery in the agriculture sector, which is likely to boost real GDP growth. Assuming an eventual smooth election re-run, we expect renewed focus on infrastructure development (including LAPSSET corridor) and continued reforms to boost manufacturing output post-elections.

Inflation: Drought shocks to crop production in Q1 2017 triggered a rise in food prices in H1 2017, with headline inflation printing at a five year high of 11.7% in May 2017, well above the CBK’s 2.5-7.5% target. Given improved weather conditions in recent months, and government intervention, inflation has eased somewhat, reaching 7.1 y/y in September. At the same time, underlying inflation remains well anchored with Non-Food Non-Farm (NFNF) inflation remaining under 5% y/y. While the pick-up in rainfall patterns and broad exchange rate stability will help to temper increases in domestic prices, inflation is likely to remain above the upper end of the target range in 2017 as pass-through effect of higher oil prices (which will adversely affect consumer sectors) and higher government spending (especially on election-related activities) offset such gains. Alongside base effects as drought shocks recede, expectation of an improved harvest in 2018 (assuming favourable weather conditions) should see food price inflation slow during the year, helping to ease overall inflationary pressures. In view of this we expect the inflation rate to fall within the central bank’s inflation target, reducing the scope of policy hikes.

Fiscal balance: The fiscal deficits are likely to remain large in calendar 2017-18 and fiscal 2017/18 and 2018/19 (albeit narrowing), well above the fiscal target of 3.7% of GDP by 2018/19, which should help the government progressively converge towards the East African Monetary Union deficit ceiling of 3.0% of GDP by 2020/21. Although efforts to strengthen capacity at the National Treasury’s Debt Management Office and to complete the introduction of the Treasury Single Account should help efforts to manage debt and strengthen public financial management, government spending pressures will remain high; this is given increased intervention in the agricultural sector in response to the recent drought, election-related expenditure, and a potential slowdown in tourism due to election-related concerns. The government’s high growth-enhancing public investment programme and security challenges will also increase spending pressures. While plans to mobilise revenue will go some way towards financing budgetary operations, the existence of the interest rate cap will continue to undermine banks’ lending activity to the private sector and hence tax revenue prospect. Overall, meeting the East Africa Monetary Union deficit ceiling will require efforts to improve the efficiency of public spending and strengthen expenditure control to mitigate fiscal risk.

Current account: Given a high import dependence (Import-GDP: 23%), the drought shocks to agriculture and elevated capital investment are likely to compound current account deficit in 2017. Despite the drought, higher tea prices in H1 2017 (up 13%) and stronger horticulture exports supported a modest expansion in exports. However, adverse impact of the drought on food production drove higher imports of maize and sugar. Amid rising oil imports due to higher oil prices, election linked imports, in particular data processing machines, and continuing capital imports helped keep imports elevated. Consequently, we expect a deterioration in the current account deficit to 6.2% of GDP (2016: 5.2%). In 2018, though rising oil prices is likely to drive an uptick in oil imports, we expect improved rainfall to lessen the food imports while boosting horticulture and tea exports. In addition, continuing recovery in tourism receipts and lower capital imports (as SGR- related spending declines) will help to narrow the current account deficit (albeit remaining large).


Renewed dry weather spells poses downside risks to Kenya as the adverse impact on agricultural production dampens exports of tea, coffee and flowers. In addition, as in 2017, drought shocks hurts domestic food production leading to inflationary pressures and higher imports. Kenya also faces the threat of further terrorist attacks from the Al Shabab militant group in neigbouring Somalia, which will hurt tourism receipts. Lastly, delayed resolution of the political impasse surrounding the cancelled August 2017 presidential polls heightens political risk premiums on KES-denominated assets, which will hamper the country’s trade and investment profile.

FX, FI and Commodity Information

FX, FI and Commodity Information

Exchange Rate Structure

TargetNo target, limited intervention to reduce volatility
Type of interventionVia spot market
Convertible currency?No
Market participantsn/a
Source: Bloomberg, IMF, and Ecobank Research


FX ProductsSpotForwardsNon-deliverable ForwardsOptionsSwaps
On offerYesYes – up to 12 monthsYes – up to 2 yearsNoYes
Daily trading volume (USD mn)n/a4.23n/a
Average trade size (USD mn)4.23
Average spreadn/a
Trading hours08.30-16.30
Settlement cycleT+2T+2T+2n/aT+2
FX Market StructureThe CBK and Kenya Tea Development Authority (KTDA). It also makes regular purchases of FX from the interbank market to create a buffer to maintain KES stability.
Non-resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowNo restrictionsn/a
Financial flowNo restrictions
Resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowNo restrictionsn/a
Financial flow
Source: Bloomberg, IMF, and Ecobank Research


Primary MarketTreasury billsTreasury notesTreasury bondsCentral Bank billsOMOs
End useGovernment financingGovernment financing
Maturity structure91- to 364-days2- to 30-yrs
Coupon paymentsn/aSemi-annual
Secondary Market
Daily trading volumeLimited tradingn/a
Average trade sizeLimited trading
Settlement cycleT+3
Ecobank local affiliate contact details:
Ecobank Kenya HQ, Fortis Office Park, Muthangari Drive, off Waiyaki Way, Nairobi
Tel: +254 20 288 3000
Source: Bloomberg, IMF, and Ecobank Research

FI Primary Market information

FI Primary Market information

Kenya Debt2014201520162017e2018f
Government debt (% GDP)48.651.652.656.256.0
Sub-Sahara average44.552.656.155.655.8
External debt (official creditors, % GDP)22.824.725.428.127.6
Sub-Sahara average25.530.231.932.933.2
External public debt stock (USD bn)14.015.817.922.023.7
Share of total sub-Sahara debt (%)
Source: IMF and World Bank

Banking Sector Information

Banking Sector Information

Kenya’s banking sector, which is regulated by the Central Bank of Kenya (CBK), is the largest in the East African Community (EAC). There were a total of 41 commercial banks operating in the country in 2015. Total banking sector assets grew by 14% year-on-year in local currency (Kenya Shilling) terms to an equivalent of USD35.6bn. Loans and advances to customers was the sole driver of this growth, with commercial banks expanding their loan books by 19% year-on-year in local currency terms to an equivalent of USD21bn. The six largest banks, which are classified as Tier I banks by the CBK, accounted for 51% of total assets and loans, as well as 52% of customer deposit liabilities. However, this did not present significant concentration risks as medium-sized Tier 2 banks accounted for 42%, 41% and 40% of total assets, loans and customer deposits, respectively, with the small Tier 3 banks accounting for the balance.

Key balance sheet items, US$ millions

Cash (both local & foreign)696606
Balances due from Central Bank of Kenya1,9131,969
Investment Securities7,4167,031
Loans and Advances to Customers20,46621,453
Other Assets4,8504,508
Total Assets35,34035,567
Due to Central Bank Bank1,22649
Customer Deposits24,28025,222
Due from Other Banks1,2761,407
Borrowed Funds1,7582,061
Intra-group Balances663721
Total Funding Liabilities29,20329,459
Source: CBK

SMEs are driving growth in lending

The Kenyan market remains loan-driven, with loans and advances to customers accounting for 60% of total assets and 76% of all earning assets. Lending is evenly distributed between SMEs, corporates (local and multinationals) and consumers (see chart below). Lending to SMEs grew by 21% year-on-year in 2015, outpacing growth in corporate (7%) and consumer (10%) loans. As a result, the share of SMEs loans grew by 300bps year-on-year to 26%. Tier I banks, with the exception of Standard Chartered, tend to lend across all three segments, while Tier II banks have built a strong exposure to SMEs. Tier III banks often target the lower-end SMEs.

Sight deposits continue to drive funding

Customer deposit liabilities accounted for 86% of total funding liabilities at end-2015, up from 83% a year earlier, underlining commercial banks’ reliance on customer liabilities as their main funding source. Customer deposits with contractual maturities of below 90 days accounted for 65% of total deposits. Term deposits accounted for highest share, at 48%, while demand deposits (driven by transaction accounts) accounted for 40%. The lack of stickiness of balance-sheet funding continues to constrain banks’ ability to create longer-term assets.

Loan books are driving earnings

Gross banking sector revenues in FY2015 grew by 11% year-on-year in local currency terms to an equivalent of USD7.2bn. Net revenues grew by a weaker 4% year-on-year in local currency terms to an equivalent of USD3.4bn. Annuity income from loans and advances to customers accounted for 41% of total gross revenues, marginally up on the previous year. On aggregate, gross funded revenues accounted for 53% of total gross revenues, while net funded revenues accounted for 69% of total net revenues. Balance sheet funding costs rose in FY2015, with commercial banks spending 42% of gross income from loans and advances on funding costs, up from 35% in FY2014). This reflects bank’s heavy reliance on expensive term deposits as a funding source. Banks delivered PBT of 40% of net revenues in FY2015, underlying the high levels of efficiency of Kenyan banks; in FY2015 the sector’s cost-to-income ratio (CIR) stood at 51%.

Loan non-performance is set to rise

In FY2015 the ratio of gross non-performing loans (NPLs) to gross loans, rose by 130bps to 7.1%. This rise was driven by the corporate segment (especially trade and real estate loans) as well as consumer loans. The slowdown in economic growth in 2016-17 could trigger more loan reclassifications by commercial banks, which could push the NPL ratio into double digits by end-2017.

Capital adequacy is adequate

Kenya’s banking sector’s capital adequacy remained satisfactory in 2015. The ratio of core capital to total risk-adjusted assets remained at an average of 16%, both in 2014 and 2015, which is above the statutory minimum of 12%. The capital adequacy ratio decreased marginally from 20% in 2014 to 18.9% in 2015, but it remained above the statutory minimum of 14.5%. The current core capital regime has set the minimum of paid up share capital for commercial banks at Kshs.1bn (or USD10mn). There have a number of attempts by the National Treasury to increase the minimum core capital, but these have not yet secured the backing of Parliament.

Commodity and Trade Information

Commodity and Trade Information

Hydrocarbon & Mineral Production

Kenya is estimated to have reserves of over 1bn barrels of oil, based on discoveries made jointly by Tullow Oil and Africa Oil. However, oil production is not expected to start until 2018/19 pending determination of the route for the pipeline that will transport crude oil from Uganda via Kenya to its ports. Kenya’s 80,000 bpd refinery at Mombasa – the sole refinery in East Africa which served the petroleum products needs of the entire EAC region – closed in 2015. Since then, the region has been 100% dependent on imports to meet its 11bn litres/year of petroleum product consumption. Kenya accounts for around one third of the petroleum products consumed in the EAC. A new 100,000 bpd refinery is planned to be built at either Isiolo or Lamu, but this will require the governments of Uganda and Kenya to proceed with the previously agreed pipeline route that passes through the northern part of Kenya where Tullow’s oil fields are located.

Kenya’s mining sector is underdeveloped, and mostly consists of artisanal production of gold (an estimated 300kg in 2015), industrial minerals and gemstones. Industrial-scale production includes titanium ore, with output of 320,000 tonnes in 2015, and mineral sands. In late 2013 production started at the Kwale Mineral Sands deposit which aims to ramp up output to 80,000 tonnes of rutile, 360,000 tonnes of ilmenite and 30,000 tonnes of zircon per year. Reserves of copper, lead and zinc have also been identified but they have yet to be commercially exploited. Kenya is a major producer of cement with total installed capacity of 8.9mn tonnes, serving both domestic and regional markets.

Soft commodity production

Kenya is a diverse producer of agricultural commodities for domestic, regional and world markets. Kenya is the world’s leading producer of black tea with estimated output of 474,808 tonnes in 2016, and is the world’s largest exporter of tea by volume. The sector is overseen by the Kenya Tea Development Agency (KTDA) and all tea is sold via the Mombasa tea exchange. Kenya is East Africa’s fourth largest coffee producer with estimated outturn of 783,000 60-kg bags of Arabica coffee in 2016/17 (October-September). Kenya is renowned for high-quality Arabica coffee beans, which are used by roasters in blends. Specialty coffee roasters are also attracted to Kenya’s coffee for its single-origin and rarefied flavours. However, the sector is struggling to boost output, which plummeted from an all-time high of 1.7mn bags in 1995/96, owing to weak prices and low yields, which have led many farmers to sell off coffee plantations to real estate development and quit the crop for more lucrative alternatives.

Kenya is Sub-Saharan Africa’s leading horticultural producer. The country produces around 140,000 tonnes of cut flowers (mainly roses) and 140,000 tonnes of vegetables and tubers each year. The vast majority are destined for European markets, where Kenyan goods have duty-free access. The country is also an important producer of macadamia nuts and avocados with output of 5,000 tonnes and 19,000 tonnes in 2016, respectively.

Kenya is a major producer of food crops for domestic & regional consumption. In 2017 the country produced 2.8mn tonnes of maize, 450,000 tonnes of wheat and 100,000 tonnes of milled rice. However, this was insufficient to meet domestic demand, requiring imports to make up the shortfall. Kenya is also East Africa’s largest producer of sugar, with estimated output of 625,000 tonnes in 2016/17. Sugar production has been broadly flat in recent years, owing to heavy constraints on the sector, and the country has been steadily increasing imports of sugar to meet the domestic deficit.

Commodity Trade Flows


Kenya’s imports totalled US$16.2bn in 2016. High-end capital goods – machinery, vehicles and electronics – were the largest imports, together worth US$4.5bn, along with US$1.5bn worth of apparel & footwear. This reflects both the weak capacity of the manufacturing sector to meet domestic demand, as well as Kenya’s role as a regional transport hub. There were also large imports of industrial raw materials, including iron & steel (US$986mn) and plastics (807mn). Petroleum product imports totalled US$1.3bn in 2016, lower than in previous years reflecting the slump in international oil prices since mid-2014. Despite producing large volumes of cereal, high demand from the growing population and food processing sector drove high imports of grains, including US$251mn worth of wheat (8.3% of SSA’s wheat imports, the third largest) and US$226mn worth of rice. Kenya also imported US$283mn worth of sugar and US$206mn worth of crude palm oil (6.5% of SSA’s total imports), most of which was processed in-country into palm oil & its derivatives, underlining the country’s status as a regional processing hub for palm oil.


Kenya’s exports totalled US$4.97bn in 2016. Raw commodities dominate export flows, making up six of the country’s top ten exports. Black tea was the largest export, totalling US$1.14bn in 2016, equal to 22% of world tea exports, over half of which went to Pakistan, Egypt and the UK. Kenya also exported US$690mn worth of cut flowers, mostly to the Netherlands, the UK and Germany, capitalising on duty-free access to EU markets. Other soft commodity exports included fruit & nuts (US$342mn), vegetables (US$293mn) and coffee (US$227mn). Kenya also exported textiles, apparel & footwear worth US$377mn, the bulk of which went to the USA under the AGOA trade agreement. Kenya’s only significant hard mineral export is titanium ore, worth US$116mn in 2016.

  • Flag
  • Population
  • Area
    580,367 km2
  • Capital
  • Largest city
  • Official language
    English, Kiswahili
  • Major languages
    English, Kiswahili
  • Currency
    Kenyan shilling (KES)

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