World Bank has revised Kenya’s economic growth from a projection of 5.5 percent to 4.9 percent for 2017.
In its Economic Update on Kenya, the World Bank attributes the downward revision to drought that affected agricultural output and hydropower generation, a prolonged electioneering period and a slowdown of credit to the private sector.
Economic activity in Kenya is likely to have declined to its weakest level in five years, says the World Bank’s Kenya Economic Update released in Nairobi on December 7. GDP growth is estimated to drop to 4.9% in 2017, a 0.6 percentage point dip from the earlier forecast of 5.5% growth.
The impact of these on economic growth was partially mitigated by a rebounding tourism sector, strong public investment, and relatively low oil prices. As some headwinds ease, the medium-term outlook points to recovery in economic activity of up to 5.5% in 2018 and 5.9% in 2019. The robustness of this upturn will be contingent on the implementation of supportive policy reforms.
The Bank maintains that while removal of interest rate cap will spur the flow of credit to the private sector, more will need to be done to bolster small and medium-size businesses.
“Lowering credit cost and widening credit access sustainably call for a reduction in the benchmark risk-free government T-Bill and Bond rates, complemented by microeconomic reforms that include the universal adoption of credit scoring accelerating the implementation of the movable collateral registry and strengthening consumer protection and financial literacy,” says Mehnaz Safavian, Lead Financial Sector Specialist at the World Bank.
The Bank projects that the economy will grow at 5.5 percent in 2018 and 5.9 percent in 2019 if supporting policies are implemented and macroeconomic stability.
Some of the structural and sectoral reforms needed to propel the economy include rationalizing public wages and salaries, strengthening revenue mobilization and improving efficiency in public investments.