The World Bank predicts that Kenya's economic growth will remain moderate in the face of a flat global growth prospect.
In its global economic prospects released last week, the World Bank forecasts that Kenya's GDP will peak at 4.9 per cent this year, way below its peers in the sub-Saharan Africa region.
The region is expected to grow at an average 6.1 per cent this year. The report notes that the main export products and tourism may take a hit from the Euro crisis and the general slow growth in the developed countries.
"Four years after the onset of the global financial crisis, the world economy remains fragile and growth in high-income countries is weak," says the World Bank in the report.
The World Bank estimates that the global economy grew by 2.3 per cent in 2012, down from its prediction made in June 2012 of 2.5 per cent and it expects 2.4 per cent growth in 2013.
"The global economic recovery remains fragile and uncertain, clouding the prospect for rapid improvement and a return to more robust economic growth," World Bank Group President Jim Yong Kim said.
The report advises that developing countries will need to focus on raising the growth potential of their economies, while strengthening buffers to deal with risks from the Euro Area and fiscal policy in the United States.
"Developing countries have remained remarkably resilient thus far, but we can't wait for a return to growth in the high-income countries, so we have to continue to support developing countries in making investments in infrastructure, health and education," said Yong Kim.
According to the report, weakness in high-income countries is dampening developing country's growth, but strong domestic demand and growing South-South economic linkages have sustained their resilience.
Central Bank of Kenya's move to tackle inflation pressure using aggressive policy rates cuts was cited as having a stabilising effect and supporting growth sectors through availing credit, but the impact was much less that expected.
In the medium term, the World Bank forecasts high value foreign direct investment inflows in the East African region due to its new found oil and gas interests.