KNBS released 3Q 2021 economic growth figures which continued to reflect economic recovery. Real GDP grew by 9.9% compared to a contraction of 2.1% recorded in the same quarter of 2020.The performance was driven by a significant rebound in the; Manufacturing, Education, Transportation and Storage, Accommodation and Food Serving. Contrary to the growth recorded in most of the sectors, Agricultural sector contracted by 1.8% compared to 4.2% growth in 3Q 2020 owing to continued drought and poor weather conditions that reduced farm produce.
IFC entered into a share purchase agreement with Britam to acquire 4.2% or 158,540,750 shares held by Britam in Equity Holdings. The deal will see IFC become Equity’s second largest shareholder with a 6.7% stake. We view the move as a portfolio realignment by Britam as they seek to deploy the proceeds to more stable asset classes.
IMF announced that it had completed its second review of the 38-month Extended Arrangement under the Extended Fund Facility (EFF) and the 38-month arrangement under Extended Credit Facility(ECF) for Kenya. IMF disbursed USD 258.1Mn bringing the total disbursement under the arrangement to USD 972.6 Mn. We expect the dollar inflow from the facility to support the shilling which has been under pressure and the conditions accompanying it to help streamline the government’s fiscal discipline.
During the month, the president signed CBK Amendment Act 2021 that gave CBK power to regulate and license the previously unregulated digital lenders.
The shilling further weakened during the month to close at KES 113.14 against the dollar owing to the continued strengthening of the dollar against other currencies and increased dollar demand from importers.
Inflation during the month of December decreased by 7bps to 5.73% from 5.80% recorded in November. The decrease is partly attributed to eased pressure on food inflation that declined to 9.09% from 9.92% recorded the previous month. We expect headline inflation to remain within the mid section of CBK’S target range of 2.50% - 7.50%. However, expected increase in maize and wheat flour prices due to supply hitches is likely to exert pressure on food inflation in the coming months.
