Real GDP growth was a robust 5.8% in 2016, driven mainly by services (which accounted for 66% of growth) and industry (which accounted for 19% of growth). Agriculture accounted for 15% of growth, the lowest in recent years. Growth in services was driven by real estate (which grew 12%) and transport and storage (which grew 10%), and growth in industry was driven by construction (which grew 8.2%) and manufacturing (which grew 6.2%). Real GDP growth declined to an estimated 5% in 2017, due to subdued credit growth caused by caps on commercial banks’ lending rates, drought, and the prolonged political impasse over the presidential election. The half-year estimates show that the economy remained fairly resilient, growing 4.8%. Services accounted for 82% of that growth, and industry accounted for 17%; agriculture’s poor performance continued. The economy is projected to rebound to GDP growth of 5.6% in 2018 and 6.2% in 2019.
Overall macroeconomic fundamentals were stable in 2016. Authorities pursued prudent monetary, fiscal, and exchange rate policies. The central bank retained the policy rate at 10% to anchor inflation at the single-digit level (6.3%). Fiscal policy was expansionary and focused on financing infrastructure mega-projects. Higher government spending, coupled with weaker revenue mobilization, increased the budget deficit to 8% and the public debt–toGDP ratio to 54%. The December 2016 International Monetary Fund (IMF)–World Bank Debt Sustainability Analysis put the country at low risk of debt stress. The balance of payments deficit improved slightly to 0.6% of GDP for the year ending June 2017, from 1.7% for the year ending June 2016, on the back of improved current, capital, and financial account balances. This progress increased foreign exchange reserves 0.8%, to a new high of $7.8 billion at end June 2016. The increase in foreign reserves, as well as the precautionary arrangement with the IMF amounting to $1.5 billion, contributed to exchange rate stability. Economic performance in 2017 was mixed. The drought and the presidential election crisis likely affected macroeconomic performance. Inflation increased to an estimated 8.8%; the budget deficit remained high, at an estimated 7.8% of GDP; and the current account deficit increased to an 5.9% of GDP. The economy is projected to be stronger from 2018 onward.