NSE-Web-Prospectus-2014

Section 10
Selected Macroeconomic Indicators
The following is selected information on macroeconomic
indicators on Kenya as background to making an investment
decision:
10.1 Gross Domestic Product
Provisional estimates of Gross Domestic Product (GDP) for Third
Quarter 2013 by Kenya National Bureau of Statistics, show that
the country’s economy maintained a moderate growth of 4.4
per cent in the third quarter of 2013 compared to 4.5 per cent
recorded during a similar quarter of 2012.
It is believed that although Kenya’s economic growth prospects
are improving, its limited economic diversification, narrow export
base, low per-capita income and infrastructure deficit, weighs on
productivity and competitiveness and overall constrains potential
growth to 8%-10%. However, there are targets of 6% - 7% in
the near term.
New information in the public media is emerging as to the possible
rebasing of Kenya’s GDP in year 2014 to take into account new
factors that may improve the GDP and improve the per capita
income.
10.2 Medium Term Debt Management Strategy
Source: Report dated February 2014 by The National Treasury
The strategy includes: 60% net domestic borrowing, 40% net
external borrowing to finance the central government budget and
issuance of medium term domestic debt. There is an intention to
lower the nominal public debt to GDP ratio to below 45 per cent
and maintain inflation at 5 percent. One of the objectives of the
Euro Bond to be issued in FY2013/2014 is to act as a benchmark
for the corporates who may wish to access external funding. The
stock of public and publicly guaranteed debt is projected at Kshs
2.23 trillion or 53.3 percent of GDP in nominal terms as at end
June 2014 of which 52% is projected to be domestic debt and 48
percent external debt.
10.5 Exchange Rate
April 10, 2014: The Kenya Shilling traded at an average of Kshs
86.56 (January 31, 2013: Kshs 87.58) per USD and Kshs 119.81
(January 31, 2013: Kshs 117.93) per Euro. Sterling Pound was Kshs
145.24 and it was Kshs 85.05 per 100 Japanese Yen. In the East
African Community region, the Kenya Shilling traded at an average
of Uganda Shilling 29.27, Tanzania Shilling 18.83, Rwanda Franc
7.86 and Burundi Franc 17.91.
10.6 Balance of Payments
Kenya’s overall balance of payments position declined to a
surplus of USD 685 million in the year to December 2013 from a
surplus of USD 1,261 million in the year to December 2012. This
is attributed to a reduction in the capital and financial account
surplus. The cumulative current account deficit as a proportion of
GDP reduced to 9.10 percent in the year to December 2013 from
10.45 percent in the year to December 2012.
The current account balance narrowed from a deficit of USD
4,254 million in the year to December 2012 to a deficit of USD
3,702 million in the year to December 2013. The narrowing of
the current account balance is attributed to a decline in the
merchandise account deficit and an improvement in the services
account surplus.
The following is sourced from the Central Bank of Kenya website:
10.3 Inflation
The overall 12-month inflation rate in June 2014 stood at 7.39
percent. The rate for February 2014 was 6.86 percent down
slightly from January 2014, the sixth month since September 2013
it has dropped. However, the rate was 4.44 percent in February
2013.
10.4 Central Bank Rate, Interest Rates
(1) On 14 September 2011, the Central Bank Rate was increased
to 7.00% from 6.25% previously. By 11 January 2012 the rate
had sharply moved to 18.00% which remained the same till 5
June 2012 when longer term auction deposits were introduced
to further assist in liquidity management. On 5 July 2012, on
the back of a high current account deficit of 11.3% in May
2012, the rate was dropped to 16.5%. Since, 10 January 2013,
on the back of a more positive outlook on the economy the
rate had gradually dropped to 9.5%. The current rate is 8.5%.
(2) The 91-day Treasury Bill rate in June 2014 increased to over
11% p.a.
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