Central Bank of Kenya Governor Patrick Njoroge recently stated that he anticipated growth increasing to 6.20% in 2020 from 5.70% in 2019 – “…despite a gloomy outlook for the global economy, Kenya’s growth will be robust driven by revitalization of the agricultural sector, small and medium enterprises and growth in credit to the private sector following the repeal of the interest rates cap.” We are slightly less bullish and expect growth to be 5.90% in 2020. Importantly, growth should exert a muted impact on salary increases for 2020.

Interest rates have recently been reduced and further cuts are anticipated this year. The Monetary Policy Committee (“MPC”) of the Central Bank of Kenya, reduced official interest rates to 8.25% from 8.50%, at their meeting on 27 January 2020. This was despite inflation remaining at 5.80% for December 2019 and January 2020.

The MPC are sanguine about future inflation and noted that in their opinion, the recent increase was attributable to “…increases in food prices and transport costs during the festive period”. Inflation in Africa is notoriously difficult to predict, and it is therefore not surprising that the MPC added a caveat – “The MPC Private Sector Market Perception Survey conducted in January 2020 indicates that inflation expectations remain well anchored, mainly due to expected lower food and electricity prices. However, some respondents expect that the recent disruptive rainfall and locust invasion in some parts of the country could lead to post-harvest losses and exert moderate upward pressure on food prices.”

Our inflation model currently agrees with the MPC and we are forecasting inflation remaining well within the governments 2.5% to 7.5% inflation range during 2020. After averaging 4.70% in 2018, our forecast is:

Given these recent developments, several clients have asked us to relook at our recommended salary increase for 2020.

Our recommended salary increase for 2020 remains unchanged at 6.50% which implies a 1.00% real salary increase for employees:


Our historic salary increase recommendations are: