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30 January, 2023
Press Release



For the Kenyan economy, our outlook for 2023 is NEUTRAL on GDP Growth. We project the economic growth to come in at within the range of 4.8% - 5.2% in 2023. We expect to see a rebound in sectors such as agriculture, with the government subsiding key inputs such as fertilizers which will be key in increasing the country’s food security. Additionally, we expect that fuel and imported commodities prices will reduce in the long term as supply chain constraints continue to ease. We also expect to see increased GDP output from sectors such as Real Estate and Construction as the government pursues the Affordable housing agenda. However, the tightened monetary policies, elevated inflationary pressures as well as the high import bill will continue to curtail economic growth.” Said Kevin Karobia, Lead Investments Analyst at Cytonn.

Below is a Summary of the 2023 Markets Outlook:


Macroeconomic Outlook

Market Outlook for 2022



GDP Growth – Our outlook for 2023 is Neutral on GDP Growth. We are projecting the economy to register a growth within the range of 4.8%- 5.2% in 2023 supported by continued recovery of businesses and expected rebound in agricultural sector and other sectors; this is on average 0.1% points lower than the estimated 2022 growth of 5.1%. The key downside to this growth shall be tightened monetary policy, high risk of debt distress and elevated inflation,

Inflation - Our outlook for 2023 is Neutral on Inflation. We expect the annual average inflation rate to fall back within the government’s target of 2.5%-7.5% coming in at an average of 6.6% as compared to 7.6% in 2022. The decline will be driven by an expected cooling in inflation, both globally and locally as the tightened monetary policy continues to take effect. However, the current high global crude oil prices as well as high food prices, will continue putting pressure on the inflation rate in the short term. Additionally, the current administration is keen to phase out consumption subsidies that will see increases in prices of fuel and electricity;

Currency - Our outlook for 2023 is Negative on Currency. We project the Kenya Shilling to trade within the range of between Kshs 130.2 and Kshs 134.4 against the USD in 2023, driven by the ever present current account deficit and the currently high global crude oil prices weighing in on the dollar demand from oil energy importers,

Interest Rates – Our outlook for 2023 is Negative on Interest Rates. The Central Bank is expected to continue tightening monetary policy stance in the medium term with the intention of anchoring inflation which is currently above the target range. Additionally, we may see slight upward pressure on the interest rates as the government compensates investors for the increased risks posed by currency depreciation and elevated inflation

Government borrowing – We expect the government to borrow aggressively from both the domestic and foreign markets as it aims to plug in the fiscal deficit, which is projected to come in at Kshs 689.2 bn in the FY/2023/24, 4.3% of the GDP as well as paying the upcoming maturities. On revenue collection, we expect continued improvement in 2023 due to the raft of measures proposed by the Kenya Revenue Authority and the proposals in Budget Policy Statement 2023. However, the upward revision of taxes comes at a time when the business environment remains subdued which will weigh down on the projected revenue performance

Investor Sentiment – Our outlook for 2023 is Neutral on Investor Sentiment. We expect 2023 to register lower investor sentiments in the short term mainly due to elevated inflation in the country currently at 9.1%, and continued depreciation of the Kenyan currency. The business environment will also remain subdued in the short term in 2023, with the average Purchasing Managers Index (PMI) for 2022 coming in at 49.2 showing a deterioration in the business environment compared to 50.8 in 2021. However, the investor sentiments will improve in the medium term with inflation expected to ease going forward. The monthly PMI since September 2022 has also averaged 51.1, above 50 showing improving business environment momentum,

Security – Our outlook for 2023 is Positive on Security. We expect security to be maintained in 2023 with a stable political environment, following the peaceful conclusion of general elections in 2022.

Asset Class

Fixed Income & Equities Outlook for 2023

Fixed Income

We expect upward pressure on the interest rates market on the back of the government’s increased borrowing for budgetary support, debt repayments, funding of infrastructure projects and payment of domestic maturities which stand at Kshs 572.5 bn for H1’2022. Investors should be biased towards SHORT-TERM FIXED INCOME INSTRUMENTS to reduce duration risk;

Kenya Equities

We have a NEUTRAL outlook on the Kenyan Equities market in the short term but “BULLISH” in the medium to long term. We expect a slight improvement the listed sector’s earnings growth in 2023, largely driven by the continued improvement in the country’s business environment. The improvement is evidenced by an average Purchasing Manager’s Index (PMI) of 51.1 for the last four months of 2022 which is expected to raise growth prospects;

For the detailed report,See the link https://bit.ly/40egmbt

Notes to the Editor:

Cytonn Investments is an independent investment management firm, with offices in Nairobi - Kenya and D.C. Metro - U.S. We are primarily focused on offering alternative investment solutions to individual high net-worth investors, global and institutional investors and Kenyans in the diaspora interested in the high-growth East-African region. We currently have over Kshs 82.0 billion of investments and projects under mandate, primarily in real estate.

For more information, kindly contact:

Teresia King’ara        

Brand and Communications   

+254 704 597 107

Email: tkingara@cytonn.com

Cytonn Investments Management Limited, 6th Floor, The Chancery, Valley Road, P.O. Box 20695 – 00200, Nairobi, Kenya.

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