7 December 2017

Kenya: World Bank Cuts Kenya Growth Forecast to 4.9%, Sees Rebound in 2018

Photo: Siegfried Modola/IRIN
(file photo).

The World Bank expects the Kenyan economy to rebound in 2018 as headwinds such as drought, slowing credit access and politics -- that hurt growth this year -- subside.

The bank said on Thursday that it had cut back it's forecast of the country's growth this year to 4.9 per cent from an earlier estimate of 5.5 per cent.

It expects the east Africa's largest economy to rebound to a growth of 5.5 per cent next year before accelerating to 5.9 per cent in 2019.

"We believe Kenya's economy can rebound and strengthen through specific measures that safeguard macroeconomic stability, enable the recovery of private sector credit growth, and mitigate the impact of future adverse weather conditions on the agri sector," said Diarietou Gaye, World Bank Country Director for Kenya.

The economy has witnessed shocks this year that forced the government and international monetary fund to scale down their growth projection.

A severe drought that started in the last quarter of 2016 and hurt agricultural production saw the World Bank scale down its forecast in April this year by half a percentage point to 5.5 per cent.

Political season

A slowdown in credit growth coupled by a a prolonged politicking season that saw the country go to its first ever presidential election rerun at the end of October, hurt the country's key sectors -- agriculture, manufacturing and trade.

Some sectors however did well, including the services sector such as wholesale and retail, tourism and small businesses.

A rate-capping law that was introduced in the fourth quarter of last year contract contributed to the slowing of credit to businesses, which also hurt economic growth.

The World Bank recommended that the credit extended to small and medium-sized enterprises be improved, through part removal of the the interest rate caps.

Fiscal deficit

"Lowering credit cost and widening credit access sustainably calls for a reduction in the benchmark risk-free government T-bill and bond rates," said Mahnaz Safavian, lead financial sector specialist at the World Bank.

The bank also called for the narrowing of the country's fiscal deficit throughout consolidation over the medium term.

Business Daily

More on This

World Bank Revises Kenya's 2017 Economic Growth to 4.9%

The World Bank has revised Kenya's economic growth from a projection of 5.5 percent to 4.9 percent for 2017. Read more »

Copyright © 2017 The East African. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 900 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.