Kenya's economy to grow by 5.4 % in 2014

Analysts on Tuesday forecasted Kenya's economy will grow by 5.4 percent in 2014 partly due to improved global economic conditions. Old Mutual Assets Managers Chief Investment Officer Peter Andersen told journalists in Nairobi that the full year forecast for 2013 stands at 4.7 percent which will be slightly better than 2012's 4.6 percent growth. "The impact of acceleration in private sector credit lending that was seen in the second half of 2013, will enable a gradual pick up in the economy in 2014," Andersen told journalists in Nairobi. He said that Kenya is likely to generate additional revenue from new mineral discoveries. "There is also the possible of confirmation of higher amounts of recoverable oil as exploration efforts continue," he said. Kenya's southern neighbour Tanzania has in the recent past made huge discoveries of natural gas deposits. "We lie on the same geographical block as Tanzania and so Kenya could also strike offshore gas," he said. Andersen said that Kenya's stock market was one of the best performing in the Africa last year. "It is an important indicator for improving economic growth in 2014," he said. The chief investment officer said that foreign investors will continue to flock to the Nairobi Securities Exchange due to its high returns. He added that inflation has trended modestly since the implementation of the Value Added Tax on basic commodities in 2013. "We therefore expect that inflation will remain within close range of the government target," he said. He noted that in 2014, there is likely to be greater execution of the country's development expenditure. "This coupled with release of county funds could help spur economic growth in 2014," he said. The analyst said that inflation expectations had remained grounded as monetary policy was well executed in 2013. "As a result, we don't expect the central bank key lending rate to change in the near future," he said. Andersen added that the Kenya has successfully raised almost all domestic debt required for the current financial year. He called on the east African nation to package its investment opportunities to foreign investors. "Kenya offers some of best returns compared to the advanced economies," he said. Old Mutual Asset Managers Investment Analyst Carolyne Kiragu said that there are no significant material risks that would cause the core inflation to rise in 2014. Kiragu said that the expectation for high economic growth hinges on continued stability in the domestic economy. She added that there are plenty of opportunities for both foreign and local investors who can cope with the risks of a frontier economy. "The issuance of the Eurobond would also enhance Kenya's position as a key destination for international capital flows," she said. She added that Kenya's relatively stable currency has minimized the inflation pass through effects of imports into domestic inflation. According to the analyst, the latest outlook from international climate models suggest that neutral rainfall conditions will prevail over the next months. "So, farmers should realize optimum harvests, which will avoid additional food prices hikes," she said. The agriculture sector contributes approximately 20 percent of gross domestic product and most of it is rainfall dependent. Kiragu said that global black tea production in 2013 increased by ten percent. "The oversupply translated in lower prices for tea farmers in Kenya and this had a negative effect on the rural economy," she said. Data also indicated that coffee, which is a key cash crop in Kenya, suffered from persistent low prices in the past year.