Outlook for 2011-15

• The coalition government between the president, Mwai Kibaki, and the prime minister, Raila Odinga, will remain intact until the next election, in 2012.
• Mr Kibaki cannot stand for a third term and there will be fierce competition to replace him. Mr Odinga is likely to stand for the Orange Democratic Movement (ODM) and would appear to have a fair chance of victory.
• The government will remain committed to pro-market reforms, including deregulation, privatisation and trade liberalisation, but some will be delayed because of the packed legislative agenda.
• Real GDP is expected to continue to grow, from 5% in 2010 to 5.4% in 2011, as domestic conditions improve. Growth will peak at 5.9% in 2012 before subsiding in 2013-15 owing to ongoing structural constraints.
• Inflation is expected to edge up to 5.8% in 2011, from 4% in 2010, as demand growth quickens. Inflation will remain in the 5.5-6% range in 2012-15.
• The current-account deficit will shrink from 5.9% of GDP in 2010 to 5.3% of GDP in 2011, owing mainly to a rise in GDP. The gap will narrow further in 2012-15 owing to faster growth in export earnings and services inflows

Monthly review

• Kenya has now put in place some key constitutional organs, after delays, but a fresh interparty dispute about judicial reform, which has become increasingly rancorous, is again threatening progress towards a new dispensation.
• The IMF has approved a three-year, US$509m extended credit facility for Kenya, the country's largest-ever IMF loan, to help to support the balance of payments and the budget, and to facilitate fiscal reforms.
• A revenue collection shortfall in the first half of the fiscal year is pushing government borrowing higher, mainly from domestic markets. Public debt now totals about 52% of GDP and will rise further, before declining.
• Higher credit demand from the government plus higher inflation (which jumped to 5.4% year on year in January) is pushing interest rates upwards.
• The authorities have cut the central bank rate to 5.75% to ease the pressure, but this poses inflation risks.
• Real GDP growth jumped to 6.1% year on year in the third quarter of 2010, driven by good rains (which boosted agriculture, agro-processing and hydro-electricity). The banking sector also continued to grow at a brisk pace.
• The current-account deficit widened in the third quarter of 2010 as imports continued growing more quickly than exports. For the year, the shortfall is now estimated to have reached 5.9% of GDP, up from 5.7% of GDP in 2009.