Looking into domestic macroeconomic stability, sustained optimism on the economic growth prospects, improving weather conditions in most parts of the country and increased uncertainties in the global financial markets, the Monetary Policy Committee (MPC) chaired by Central Bank of Kenya governor Patrick Njoroge met to review the outcome of its previous policy decisions and recent economic developments.
The committee noted the economy recovered strongly in 2018, with real GDP growth increasing to 6.3 per cent and that growth remained resilient in the first quarter of 2019, despite the delayed onset of the long rains. Growth in 2019 is expected to be supported by agricultural production, robust growth of MSMEs and the service sector, increased foreign direct investment and a stable macroeconomic environment.
While inflation expectations remained well anchored within the target range, the economy was operating close to its potential. The Committee, therefore, decided to retain the Central Bank Rate (CBR) at 9 per cent concluding that the current policy stance remains appropriate, and will continue to monitor any perverse response to its previous decisions.
The rollout of innovative credit products, particularly those targeting Micro Small and Medium Enterprises (MSMEs) are expected to drive lending to this sector which has previously been constrained of credit. Strong growth in credit to the private sector was observed in the following sectors manufacturing, trade, finance and insurance, and consumer durables. Private sector credit growth is expected to continue to strengthen in the remainder of 2019, according to the committee.
CBK noted that although the banking sector remains resilient there has been an increase in Non Performing Loans NLP mainly in the personal/household, real estate and manufacturing sectors. In as much as Banks have continued with mitigation measures, including enhanced recovery efforts government and private sector entities should prompt settlement of delayed payments to curtail NPL and support economic growth.
MPC noted that it will continue to closely monitor developments in the global and domestic economy and is ready to take additional measures as necessary.