Boston, MA -- (ReleaseWire) -- 02/20/2014 -- The International Criminal Court investigation targeting President Uhuru Kenyatta created fears of a political crisis between the court and African states that accuse it of bias, but we believe this is unlikely.
The case has been suspended for technical reasons, and a lack of evidence may lead to its cancellation. Even if restarted, we believe that a compromise will avoid a stand-off between the court and the African Union.
Kenya's economy will accelerate in 2014, growing by 6.1% in real terms. This will be Kenya's fastest rate of GDP expansion since 2007, and BMI believes that growth will stabilise near 6.0% between 2014 and 2018. Rapid economic growth in the other East African Community states will spur demand for Kenyan goods and services.
Inflation will remain restrained over 2014 due to lower energy prices and a firming shilling. Slightly faster price growth is likely later in the year, however, due to rising food prices.
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A reduction in Kenya's trade deficit and strong service sector growth will cause the country's wide current account deficit to narrow from 8.7% of GDP in 2014 to 6.0% in 2018. Capital and financial inflows will keep the deficit covered, though we note that a dependence on short-term investment inflows leaves the economy vulnerable to external shocks.
Accelerating economic growth will increase government revenue, but we expect rising public spending to keep pressure on Kenya's fiscal balance. The country's budget deficit will narrow in 2013/2014 compared to 2012/2013, but will remain approximately 7.0% of GDP for the duration of our forecast.
Major Forecast Changes
Climactic factors pose a serious risk to Kenya's agricultural production; poor rains would harm economic growth, spur high inflation, and also necessitate large-scale food imports, putting pressure on the already stretched balance of payments position.
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