11 April 2014

East Africa: Kenya Outpaced By Eastern Africa Peers in GDP Growth

Kenya's economy expanded by 5.6 per cent in 2013 and looks set to grow faster this and next year at 6.3 per cent, latest data from the IMF show.

The International Monetary Fund carries the data in its World Economic Outlook 2014 released on Tuesday, which shows that sub-Saharan Africa's Gross Domestic Product collectively grew by 4.9 per cent.

However, the IMF downgrades the region's growth to 4.7 per cent when South Sudan is excluded. The latter matches World Bank's numbers published in its 'Africa's Pulse' report on Monday.

Kenya's GDP growth was faster than the SSA average, but it was outpaced by its peers in Eastern Africa including Ethiopia, Tanzania and Uganda.

Ethiopia registered economic growth of 9.7 per cent in 2013, while Tanzania's and Uganda's GDPs expanded by seven per cent and six per cent respectively.

The IMF shows consumer prices in Kenya, which is rated as a low-income country, were up 5.7 per cent last year. It projects a 6.6 per cent inflation rate this year, and estimates a slower 5.5 per cent change in consumer prices in 2015.

The IMF data also show Kenya's current account deficit will deteriorate this year to 9.6 per cent from 8.3 per cent in 2013, but will improve significantly next year to 7.8 per cent.

Growth in sub-Saharan Africa was buoyed by improved agricultural production and investment in natural resources and infrastructure, and is expected to accelerate this year.

"Growth was robust throughout the region, especially in low-income and fragile states (such as Burundi and Central African Republic)," the IMF states.

It however warns that tight global financing conditions or a slowdown in emerging market economies could generate some "external headwinds" especially in countries with large external linkages, mineral producers and frontier economies - which include Kenya.

It says most salient risks are domestic, stemming from policy missteps, security threats and political uncertainties. IMF advises policymakers in fast-growing countries to avoid pro-cyclical fiscal stances and address vulnerabilities posed by external shocks.

"There is lots of good news on sub-Saharan Africa's growth over the last two decades, but also plenty of room for more work. The scope is wide on what needs to be done; no room for complacency even as we celebrate the successes," Francisco Ferreira, World Bank's chief economist for Africa, said on Monday from Washington.

The IMF said fiscal deficits in SSA economies widened due to increased expenditure on investment and wages, contributing to worsening current account balances. Domestic supply and a favourable global environment are expected to drive growth.

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