NSE-Web-Prospectus-2014

Section 10Selected Macroeconomic IndicatorsThe following is selected information on macroeconomicindicators on Kenya as background to making an investmentdecision:10.1 Gross Domestic ProductProvisional estimates of Gross Domestic Product (GDP) for ThirdQuarter 2013 by Kenya National Bureau of Statistics, show thatthe country’s economy maintained a moderate growth of 4.4per cent in the third quarter of 2013 compared to 4.5 per centrecorded during a similar quarter of 2012.It is believed that although Kenya’s economic growth prospectsare improving, its limited economic diversification, narrow exportbase, low per-capita income and infrastructure deficit, weighs onproductivity and competitiveness and overall constrains potentialgrowth to 8%-10%. However, there are targets of 6% - 7% inthe near term.New information in the public media is emerging as to the possiblerebasing of Kenya’s GDP in year 2014 to take into account newfactors that may improve the GDP and improve the per capitaincome.10.2 Medium Term Debt Management StrategySource: Report dated February 2014 by The National TreasuryThe strategy includes: 60% net domestic borrowing, 40% netexternal borrowing to finance the central government budget andissuance of medium term domestic debt. There is an intention tolower the nominal public debt to GDP ratio to below 45 per centand maintain inflation at 5 percent. One of the objectives of theEuro Bond to be issued in FY2013/2014 is to act as a benchmarkfor the corporates who may wish to access external funding. Thestock of public and publicly guaranteed debt is projected at Kshs2.23 trillion or 53.3 percent of GDP in nominal terms as at endJune 2014 of which 52% is projected to be domestic debt and 48percent external debt.10.5 Exchange RateApril 10, 2014: The Kenya Shilling traded at an average of Kshs86.56 (January 31, 2013: Kshs 87.58) per USD and Kshs 119.81(January 31, 2013: Kshs 117.93) per Euro. Sterling Pound was Kshs145.24 and it was Kshs 85.05 per 100 Japanese Yen. In the EastAfrican Community region, the Kenya Shilling traded at an averageof Uganda Shilling 29.27, Tanzania Shilling 18.83, Rwanda Franc7.86 and Burundi Franc 17.91.10.6 Balance of PaymentsKenya’s overall balance of payments position declined to asurplus of USD 685 million in the year to December 2013 from asurplus of USD 1,261 million in the year to December 2012. Thisis attributed to a reduction in the capital and financial accountsurplus. The cumulative current account deficit as a proportion ofGDP reduced to 9.10 percent in the year to December 2013 from10.45 percent in the year to December 2012.The current account balance narrowed from a deficit of USD4,254 million in the year to December 2012 to a deficit of USD3,702 million in the year to December 2013. The narrowing ofthe current account balance is attributed to a decline in themerchandise account deficit and an improvement in the servicesaccount surplus.The following is sourced from the Central Bank of Kenya website:10.3 InflationThe overall 12-month inflation rate in June 2014 stood at 7.39percent. The rate for February 2014 was 6.86 percent downslightly from January 2014, the sixth month since September 2013it has dropped. However, the rate was 4.44 percent in February2013.10.4 Central Bank Rate, Interest Rates(1) On 14 September 2011, the Central Bank Rate was increasedto 7.00% from 6.25% previously. By 11 January 2012 the ratehad sharply moved to 18.00% which remained the same till 5June 2012 when longer term auction deposits were introducedto further assist in liquidity management. On 5 July 2012, onthe back of a high current account deficit of 11.3% in May2012, the rate was dropped to 16.5%. Since, 10 January 2013,on the back of a more positive outlook on the economy therate had gradually dropped to 9.5%. The current rate is 8.5%.(2) The 91-day Treasury Bill rate in June 2014 increased to over11% p.a.42