Kenya’s Banking Sector Outlook Resilient in 2022 – Apex Bank

The Central Bank of Kenya (CBK) stated in its July 2022 financial stability report that the prognosis for the Kenyan banking industry in 2022 is stable and resilient and that this is supported by adequate capital and liquidity buffers.

According to the report, a careful policy balancing has been done between efforts utilised in slowing inflation by tightening policy rates and the maintenance of accommodating monetary policy is needed for a sustainable economic recovery and financial stability.

Following the lifting of restrictions that allowed for the complete restoration of commercial activity in 2021, the Kenyan economy recovered from the COVID-19 pandemic. The central bank now expects it to expand by 5.7% in 2022.

After experiencing a 0.3% decline in 2020, the economy recovered to post 6.8% growth in 2021.

A effective implementation of monetary, fiscal, and financial policies, in addition to the relaxation of COVID-19 containment measures, not only played a stabilising role but also created an atmosphere that was favourable for economic recovery.

After surviving the Omicron variation in the fourth quarter of 2021, a successful vaccine, and improved adherence to COVID-19 guidelines, recovery is still on track.

However, the research cautioned that some of the main domestic risks to development include the potential return or introduction of the COVID-19 virus mutation, poor credit uptake during the electioneering period, and drought shock to agriculture.

The Russia-Ukraine war, which has affected energy and commodity prices and increased global inflation, was cited in the report as a global source of fragilities that has prompted faster-than-expected tightening of monetary policy.