Global Trends and Kenya Economic Review 2017

Transcription

1 Global Trends and Kenya Economic Review 2017

2 Table of Contents Key Global Trends that affect Kenya Expected Business Environment Key themes of the Budget 2017 Economic Analysis

3 Key Global Trends that Impacts Kenya Trump s proposed tax reform policies for United States US Corporate Tax Rates 35% 15% US destination based tax would boost local productivity and negatively impact countries that export to US

4 Key Global Trends that Impacts Kenya Deglobalisation wave: Protectionism and nationalism approach (Trump s win, Brexit, Make in India) Decline in world trade as a % of World GDP: Economic slowdown in china, recession in Brazil, plunge in commodity prices Decline in cross border capital flows: Reduced cross border interbank lending between major financial institutions of the developed market after the 2008 global financial crises Finding export markets in developed world would be harder

5 Key Global Trends that Impacts Kenya China under Kiss of Debt

6 Expected business environment in 2017 Current scenario Expected scenario T Bills have been oversubscribed. Launch of M Akiba (+) Financial Services, Hospitality and Energy sector, witnessing increased private equity activity (+) Increased activity in the hospitality sector with new franchises and international entrants (+) Low credit growth impacting SME businesses () Food Inflation in March crosses 10% mark due to ongoing drought () Increased expenditure spending during election period will increase the money supply (+) Stable interest rate regime (+) FDI is expected to remain positive due to government commitment to ensure stability during and after election. MNCs including Volkswagen, Wrigley's, Johnson and Johnson have announced market entry (+) Implementation of Business friendly policies and those that improve savings for individuals as evidenced by Budget 2017 (+) Increased pressure on government borrowing to complete milestones on ongoing project () Low credit lending by financial institutions due to reduced willingness and swell in Nonperforming loans ()

7 Key themes of the Budget 2017 Grow the Automotive sector Export and Prosper Recognition of Islamic finance Nairobi International Finance Centre Local Manufacturing and Assembling Lower corporate tax rates in strategic areas Invest in Security and Invite investment in Tourism and Hospitality Heavy tax on gambling and hard liquor Strengthen Healthcare by inviting FDI

8 Global growth pacing slowly REAL GDP GROWTH RATES GDP Growth (Real) 2017 GDP Growth (Real) 2016* REAL GDP GROWTH RATES GDP Growth (Real) 2017 GDP Growth (Real) 2016* South Africa Kenya US Russia Brazil Japan UK India China (4.00) (2.00) Source: IMF World Economic Outlook October 2016 SADC SSA EAC ASEAN 5 BRICS Euro Zone Source: IMF World and Regional Economic Outlook October 2016 World GDP decelerated to 3.1 % in 2016 but expected to recover to 3.4% in It s expected to grow in 2018 however uncertainty over the new US administration s policies and its effect on the World s economies needs to be monitored. Kenya s GDP is approximately USD 63 billion and is the largest among all East African Nations Kenya s GDP is seemingly growing due to consumption (government expenditure and private consumption) and not by increase in net exports (export cover ratio is a deficit) Kenya GDP growth is well above the global growth rates but needs a major push and hence there are major policy moves by the Kenyan government to boost exports Sub Saharan Africa GDP growth decelerated sharply on account of decline in commodity prices, higher inflation due to weakening of region s major currencies and weaker global trade

9 Kenya not on top slot in FDI Destinations Seychelles Zimbabwe Kenya Uganda FDI USD in Million 2,000,000 1,500,000 1,000,000 KENYA DIASPORA REMITTANCE USD MILLION Tanzania Mozambique 5,000 10,000 15,000 20,000 25,000 30, , Botswana Dem. Rep. of the Congo Morocco Egypt FDI USD in Million 800, , , , , , ,000 Gross Foreign Reserves in Kshs Million Nigeria 10,000 20,000 30,000 40, ,

10 Macros Inflation EAC Kenya Tanzania Uganda Rwanda Burundi * (5.00) (10.00) (15.00) (20.00) Current A/C as a % of GDP EAC 5 Kenya Tanzania Uganda Rwanda Burundi * (2.00) Inflation World key economies (2.00) Current A/C as a % of GDP World key economies USA UK Japan Germany India China South Africa (4.00) * (6.00) (8.00) Source: IMF World Economic Outlook October *

11 How the key Sector Performance tie to GDP growth 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Agriculture, forestry and fishing Top Sectors contribution to GDP in % Manufacturing Transport and storage Wholesale and retail trade with repairs Real Estate 2016* GDP Growth Rates YOY Financial and Insurance activities Education Construction Agriculture, Manufacturing, Transport and Storage and Electricity Supply sectors have expanded in last two years and are the key winners Wholesale and retail trade, Real estate & Information and Communication sector contribution to GDP has shown a decline over a period of last two years Growth Rate YOY 2016 Growth Rate YOY 2015 Growth Rate YOY 2014 Source: Kenya National Bureau of Statistics

12 Agriculture accounts for 30% of GDP Marketed Production (in 000s Tonnes) Tea Marketed Production Horticulture Marketed Production Maize Marketed Production Coffee Marketed Production (in 000s Tonnes) Sugar Cane Marketed Production (in 000s Tonnes) 7,400 7,200 7,000 6,800 6,600 6,400 6,200 6, Source: Kenya National Bureau of Statistics

13 Trend indicators NSE 20 Share Index 26 % Mobile and Internet Indicators Mobile Subscription Penetration 88.20% 85.40% Internet Penetration 89.70% 54.20% Mobile money transfer agents 161, ,946 Mobile money service subscribers 32 million 26.8 million Money Transaction on Mobile Money platforms (Kshs Billion) 3,567 2, Consumer Price Inflation: Base period February 2009=100 Balance of Trade In Kshs Million Exports of goods (FOB) 517, , , , ,632 Growth 3% 7% 8% 0.4% Imports of goods (CIF) 1,374,587 1,413,316 1,618,321 1,577,557 1,432,420 Growth 3% 15% 3% 9% Net Export 856, ,029 1,081, , ,788 Total trade 1,892,434 1,915,603 2,155,557 2,158,602 2,011,052 Cover Ratio 38% 36% 33% 37% 40% Source: Kenya National Bureau of Statistics

14 Horticulture (Cut Flowers) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Qty Sold (MT) Kshs in Million Industry Value (KSh Million) Size January 8,399 4,379 February 8,073 6,117 March 8,462 8,515 April 5,389 4,304 May 4,780 4,432 June 6,031 3,244 July 3,374 6,363 August 4,910 3,555 Septem ber 4,465 4,578 October 6,073 7,144 Novem ber 5,355 5,520 Decem ber 5,520 4,786 Total 70,830 62,938 Average Export Price Realisation Commodities Unit Horticulture Kg Coffee, Unroasted Kg Tea Kg Value (KSh Million) 2016 Value (KSh Million) 2015 Source: Kenya National Bureau of Statistics

15 Tourism and Hospitality 400, , , , , , ,000 50,000 AIR TRAVEL ARRIVALS BY REGION Asia Middle East Africa and Indian Ocean Americas Oceania Europe Trends and Market Updates Increase in franchising by foreign brands (Best Western International has given use of its brand to Meridian Hotel and Mombasa s Creekside Hotel) Sarovar Group from India announced plans to open Budget Hotel under Hometel Brand in Nairobi by 2019 Hotels in pipeline include ParkInn, Lazizi Premiere, Pullman and Hilton Garden Inn What will drive growth in Tourism Planned direct flight from JKIA to USA Total no. of International Arrivals Air Cruise Cross Border Total Source: Kenya Toursim Board , , ,885 N/a 3,302 2,717 N/a 431, , ,395 1,183,818 1,307,351 Major conferences planned (Africa Sugar Conference, American Society of Travel Agents Destination Expo, Africa Renewable Energy Leaders Summit, SKAL International World Congress Growth in conference tourism and Hotels expected to take a large share of the growth

16 Disclaimer Information provided here is of general nature and is not intended to address the circumstances of any particular individual or entity. The Information compiled in this document has been drawn and interpreted from the Budget Statement by Cabinet Secretary for National Treasury on 30 March 2017, Finance Bill 2017, Economic Indicators issued by Kenya National Bureau of Statistics, Central Bank of Kenya website, UCTAD Knowledge resource website, East Africa Community Customs Resources. A misstatement or omission of any fact or a change or amendment in any of the facts and assumptions we have relied upon may require a modification of all or a part of this document. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date of it is received or that it will continue to be accurate in future. No one should action such information without appropriate professional advice and after a thorough examination of the particular situation

17 Contacts FCA. Simant Prakash International Contact Partner CPA. Jitendra Swaly Senior Partner, Kenya CPA. Gurudas Anvekar Senior Partner, Tanzania CA. Dipak Chatterjee Senior Partner, India CA. Vijay Sastry Director, Canada Kamal Iyaroo Director, Mauritius CA. Imran Juma Director, Kenya Service Inquiries: Kenya Tanzania Mauritius Canada India 2017Five Elements Advisory, all rights reserved