5 Financial Trends That Could Shape Your Finances in 2023


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What are some of the biggest financial trends shaping our decisions in 2023?

The pandemic, the war and then an election year left the economy and our finances discombobulated. 2022 was supposed to be the year everything returned to normal. But, a week into 2023 it’s the same script. We are still hip-deep in uncertainty: high inflation, the ever-weakening shilling, our poor-performing bourse and a dark cloud that seems to be hovering, foreboding a recession-like situation.

“This year is meant to be easier, right?” – the optimist.

No one can predict the future of the Kenyan economy in 2023, but optimism is rife. Therefore, having a general idea of what is coming can help you prepare better. If you gird your finances for a little more turmoil at the outset of the year, the relative calm we expect to follow should be even sweeter.

Where preparation, meets opportunity.

Here are the financial trends that could share your finances in 2023:

1. Recession is coming – so analysts think.

We have been receiving warnings of a looming impending global recession this year if the war in Ukraine, the rising cost of living, inflation and other economic shocks persist.

How to handle it: Consider beefing up (or starting) your emergency fund. Having cash stashed away in case of job loss or rising expenses can provide peace of mind. Additionally, you may want to assess your debt, specifically debt with variable interest rates. In the event of economic turbulence, variable rate debt is akin to throwing an unpredictable wrench into your finances. Therefore, consider paying down high-interest and variable-rate debt to prepare for economic uncertainty.

Related: Recession-Proof Your Life: How to Thrive During Difficult Times

2. Inflation and Interest Rates will ease – at some point.

Inflation is the dragon on the ropes driven by non-economic factors and therefore it’s fair to wonder if a purely economic response like raising interest rates will be enough to tame this dragon. I do not think so, but if inflation begins receding in 2023, it will give Banks a reason to lower interest rates for borrowers.

How to handle it: High-interest rates on savings accounts and term deposits, aren’t likely to last through the year. Therefore, it is worth looking into high-rate environment investment options.

Related: How Does Inflation Affect Your Investments and Savings?

3. Stock Market Volatility – Hii economy ni mbaya!

Our stock market is quite dependent on foreign investors. Therefore, when things slow down in international markets, it drags our market along with it. Heightened global risks from non-economic events such as the pandemic, the war in Ukraine and other economic shocks, have seen large capital outflows from our bourse. These exits by foreign investors have served to dive down stock valuations and lead the way in losses.

How to handle it: No matter how the market pivots, there’s little to be gained from panic selling. Most investors are in it for the long haul anyway. So, if you are a buy-and-hold type of investor, make sure you feel comfortable riding out the highs and lows of the market. You might see some of your investments lose money, but selling when the market is down will surely lock in your losses. Thus, diversify. That is the best position to position your portfolio to weather the volatility.

4. The Kenyan Housing Market is still growing and shifting to the tide.

This year buyers will likely be dealing with prohibitively high mortgage rates as lenders adjust their lending rates upwards in line with the revised Central Bank of Kenya (CBK) base lending rate. Therefore, mortgages are now costlier despite the higher demand.

On the other hand, renters in up-market estates will likely see a further decline in rent in major estates in Nairobi as a result of the harsh economic realities we are facing.

How to handle it: If you’re not in a position to buy a home now, your situation may improve next year. Take this time to shore up your finances. Consider paying down any outstanding debt you may have and shift your down payment savings into a high-interest savings account. When things improve, hit the ground running and accomplish that goal.

Related: The Most Affordable Mortgage Rates and Top Providers in Kenya

5. Crypto Will Remain on the Fringes of the Financial System

After the events of cryptocurrency’s self-disruption in 2022, crypto will remain a fringe asset in 2023. The losses that walloped Bitcoin and many other tokens only magnified the sector’s inherent unpredictability. What’s worse is the collapse of the multibillion-dollar cryptocurrency exchange, FTX in November, exposed corruption and mismanagement.

I doubt that the issues within the crypto industry will be resolved in 2023. Additionally, its adoption into mainstream finance will remain highly unlikely. However, opportunities exist to iron out the kinks and move the industry into a positive future – for even Rome was never built in one day.

How to handle it: As always, no matter what crypto asset (a coin or stock of a blockchain company) you invest in, always do your homework. No shortcuts. In these uncertain times, you need to nail this down, particularly, how to store, trade or retrieve your assets in the event of crypto armageddon.

6. Artificial Intelligence (AI) revolution in Personal Finance

The integration of AI and machine learning in finance is one of the biggest financial trends of 2023 and has taken the industry by storm. The upside for the industry is tremendous – from revolutionizing human-based customer service and financial advice to the utilization of deep learning algorithms in predictive analytics.

Due to AI’s ability to analyze vast amounts of data quickly and accurately, decision-making will be much easier. In the context of personal finance, we can collect and review our personal data, such as income, expenses, savings, investments and financial goals using AI. AI has the capacity to provide personalized advice, tailored to our own individual needs and circumstances.

Here are some AI-powered personal finance apps that you can check out – MintZip, Cleo.

By And Large…2023 will be a year like no other

All signs are pointing to a turbulent year. High inflation, political instability, and taxes…are some of the challenges we shall be facing this year. These financial trends of 2023, will continue to evolve and shape the decisions we make. Large companies will be adopting conservative strategies and employing consistent risk management, to keep heads above water.

Image credits: Top by Picas Joe via Pexels

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Irene Makanga
Irene has an MBA in Finance and is an avid businesswoman, passionate about financial literacy.


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