Kenya: Technical Assistance Report-Improving the Business Surveys and the Nowcasting Framework at the Central Bank of Kenya

At the request of the Central Bank of Kenya (CBK), a technical assistance (TA) mission from the Monetary and Capital Markets (MCM) department visited Nairobi, Kenya, from April 17–21, 2023, to help improve the CBK’s Forecasting and Policy Analysis System (FPAS). The main objectives were to improve the CBK’s business surveys and strengthen its nowcasting framework for GDP and CPI inflation. The mission held interactive technical sessions with CBK staff and provided detailed recommendations for refining survey questions and integrating survey results into the policy process. It developed EViews programs for efficient survey data management and the conversion of qualitative data to quantitative data using the Balance of Opinion approach. Moreover, the mission improved the nowcasting framework by fixing and enhancing the EViews-based platform and developing tools for automated model evaluation. Regarding CBK business surveys, the mission recommended (i) streamlining survey questions and timing to better inform nowcasts and projections, (ii) creating a firm registry to track survey respondents and ensure sample representativeness, and (iii) automating the survey data pipeline and consolidating historical results into a time series. Regarding the nowcasting framework, the mission suggested (i) integrating quantified survey results into the nowcasting models, (ii) continuing to refine the nowcasting framework at a disaggregated level, and (iii) expanding the database of leading indicators and assessing new models using the forecast evaluation framework.