The economic performance in the third quarter of last year was robust, supported by macroeconomic stability. The growth was also steered by public investment in infrastructure, lower energy prices and the recovery of the tourism sector.
According to the Monetary policy Committee review, the market perception Survey conducted in January 2017 indicates that banks and non-bank private sector firms expect strong growth this year.
Chairman, Monetary Policy Committee Dr. Patrick Njoroge says that global growth is expected to pick up gradually in 2017 but substantial risks remain.
“Respondents expect the prevailing dry weather conditions to slowdown agricultural sector growth in the first quarter of 2017,” said Mr. Njoroge.
The Chair said that the Committee observed that available data was inconclusive for assessing the impact of the recent capping of interest rates. This is in regard to the impact on the banking sector that banks are reviewing their business models aimed at enhancing the resilience of their operations in the new environment.
The review also indicates that the foreign exchange market remains relatively stable supported by a narrowing of the current account deficit from 6.8 percent of GDP in 2015 to an estimated 5.5 percent in 2016.
Dr. Njoroge furthered that the Central Bank of Kenya’s foreign exchange reserves currently stands at USD 6,936 million which together with the precautionary arrangements with the International Monetary Fund (IMF) continue to provide an adequate buffer against short-term shocks.
The average commercial banks liquidity ratio and capital adequacy ratios stood at 41.4 percent and 18.7 percent respectively in December 2016. Private sector credit growth stabilized at 4.3 percent in December 2016 driven by lending to trade, real estate, private households and consumer durables.
Month to month overall inflation declined to 6.4 percent in December from 6.7 percent in November 2016, therefore remaining within the government target range.