Inflation risks loom despite slight dip: CBK Report
In the latest update on Kenya’s economic situation, the Central Bank of Kenya (CBK) has highlighted persistent inflation risks, even though there was a slight drop in the inflation rate from 6.9% in October to 6.8% in November 2023.
According to CBK’s findings, the decrease is attributed to lower prices of crucial non-vegetable items, like maize and wheat flour.
Food inflation saw a decline from 7.8% in October to 7.6% in November, driven by reduced prices of essential non-vegetable items.
However, the prices of certain vegetables like onions, tomatoes, and carrots remained high due to lower supply. Additionally, fuel inflation rose to 15.5%, up from 14.8% in October. Non-food non-fuel (NFNF) inflation slightly decreased to 3.3% in November from 3.6% in October.
“The risks to inflation are elevated in the near term, reflecting the impact of second-round effects of the rise in fuel inflation and pass-through effects of the exchange rate depreciation,” stated CBK.
The bank emphasized that inflation risks remain high in the short term, influenced by the effects of increasing fuel prices and exchange rate depreciation. Despite this, the GDP data for the second quarter of 2023 indicates a robust performance, with real GDP growing by 5.4%, up from 5.2% in the same quarter of 2022.
This growth is attributed to a strong rebound in the agriculture sector and resilient services sectors, including information and communication, transport and storage, financial and insurance, and accommodation and food services. Leading indicators for economic activity suggest continued strength in the third quarter of 2023.
CBK is optimistic about the future, stating, “Despite global uncertainties, the economy is expected to continue to strengthen in 2023 and remain strong in 2024, supported by a resilient services sector, the rebound in agriculture, and implementation of measures to boost economic activity in priority sectors by the Government.”
However, it’s noteworthy that goods exports faced a 2% decline in the 12 months leading to October 2023 compared to the same period in 2022. This report underscores the need for careful monitoring of inflation trends and continued efforts to support key sectors for sustained economic growth.