Current inflationary pressures are in line with global trends, the report says, including supply chain disruptions caused by the Covid-19 pandemic, high energy prices, food shortages due to the Russia-Ukraine conflict, a strengthening US dollar and sanctions in China. The subsequent COVID-19 outbreak has led to a rise in global inflation. High inflation is a major investment risk, as central banks in developed economies lean toward higher interest rates to curb inflation.
The report predicts that the Central Bank of Kenya (CBK) may raise interest rates in 2023 to manage inflationary pressures and global risks. However, Uganda may see a tempering of the risk of higher interest rates due to greater liquidity in the money markets. Meanwhile, the Bank of Tanzania is expected to maintain an accommodative monetary stance to boost private sector credit growth.
The report notes that Kenya is particularly vulnerable to inflationary pressures due to its high debt-to-GDP ratio and exposure to foreign currency debt. The country has a USD 2 billion Eurobond repayment due in June 2024 and the report predicts that CBK will prioritize foreign debt servicing repayments, with the government relying more on multilateral agency funds, commercial syndicated loans and CBK foreign exchange reserves for foreign funding. Loan terminations.
The Kenyan stock market outlook is bleak following a 23.4% market decline in 2022; Stock market valuations are cheap now and can represent an attractive entry point for long-term investors. However, US dollar strength and high yields on local government bonds may still dampen investor participation in the securities exchange. Exchange Africa Reported.
Investors should consider diversifying into alternative assets such as private equity and emerging real estate opportunities, such as data centers, healthcare, student housing, cold storage, affordable housing and infrastructure, which can offer higher returns than more traditional investments, the report suggests.