Kenyan fiscal pressures.
Economic headwinds will culminate in slower GDP growth this year as drought, slowing credit and pre-election uncertainty weigh on activity. Growth is forecast to decelerate to 5.3%, from 6.0% in 2016, but could pick up pace again to 5.8% next year, as infrastructure development boosts productivity. Benign external conditions, along with policy prudence, has helped stabilise macroeconomic variables and consolidated the government's credibility. However, the elevated fiscal deficit remains a source of vulnerability.
- Despite robust performance, growth is still significantly below the 8% needed to lift Kenya to upper-middle income status by 2030.
- Interest in the planned Eurobond could surpass levels achieved by West African peers this year given better progress on structural reforms.
- While Kenya's first mobile bond or 'M-Akiba' proved successful, institutional lenders will remain the main source of government financing.