El Nino Risks Already Factored into Kenya Growth Forecast, CBK Governor Says

Kenya's central bank has factored the potential economic damage from El Nino rains into its growth forecast for the fourth quarter, Governor Dr Kamau Thugge said on Wednesday, leaving room for an upside surprise if the weather proves less disruptive than expected.

• Thugge said the Central Bank of Kenya had adopted a cautious approach to fourth-quarter growth, particularly because of the potential impact of heavy rains on agriculture between October and December.
• Kenya is currently projecting economic growth of 4.9%, Thugge said, although he indicated that growth could be stronger if the net impact of the rains turned out to be positive.
• The Kenya Meteorological Service has estimated an 81% chance that this year's El Nino will be strong and a 97% probability that its effects will continue into early next year, according to a government assessment released this week.

"We have fully taken into account the potential adverse impact of the El Nino rains," Dr Thugge said during the post-MPC briefing, adding that the bank's projections for the final quarter were conservative compared with what they would have been without the expected weather disruption.

"Potentially, we could have a much higher growth than the 4.9 if it turns out that the net impact of the El Nino rains would be positive," he said.

The governor said the impact of previous El Nino episodes on economic growth had been mixed, making the eventual effect difficult to predict. The weather threat comes after agriculture contracted by 1.4% in the fourth quarter of last year because of drought, Thugge said.

The cautious outlook comes as Kenya prepares for potentially heavy rainfall from October, with the government identifying 18 counties as particularly vulnerable to flooding, landslides, disease outbreaks, drought and infrastructure damage.

The central bank expects agriculture to rebound this year partly because of the low base from the previous year's contraction, but has tempered its fourth-quarter assumptions to account for the possibility that excessive rainfall could damage crops and disrupt economic activity.

The government's risk assessment identifies counties in the Coast, Lake Basin, Rift Valley and North Eastern regions among those facing the highest vulnerability. Nairobi, Mombasa and Kisumu have also been classified as high-risk urban centres.