Kenya registered growth acceleration in Q2 to +6.3% y/y from +5.7% in Q1 (and +4.9% in 2017). Farming (23% of the economy) was weak last year and was the first growth contributor in H1. In Q2, it grew by +5.6% y/y in Q2 as a result of better crops (growth was about +1.5% in 2017). This growth acceleration is also broad-based, since the manufacturing output grew by +3.1% in Q2 (after stalling in 2017), driven by a recovery of business confidence. The manufacturing PMI was above 54 on average during the first nine months of the year (its trough was in October 2017 at 35). Moreover, the electricity and water output (+8.6% y/y in Q2) shows that this recovery should not be short-lived. Overall, our 2018 growth forecast is at +6.5%. Downside risks can be triggered by higher inflation (it was +4.4% y/y on average year-to-date) and tax hikes, since the government is trying to rein in its fiscal deficit (-8% of GDP in 2018).
