CBK upbeat about robust economic growth

October 1, 2010 12:00 am

, NAIROBI, Kenya, Oct 1- Robust performance in some major sectors of the economy continues to be a key indicator to policy makers that the country’s growth prospects this year will be above the projected 4.5 percent.

The Central Bank of Kenya (CBK) Governor Prof Njuguna Ndung’u on Friday pointed to the double digit growth of 11 percent that was recorded in the power generation sub-sector in the second quarter – a first in Kenya’s history – which he said was encouraging.

“We haven’t had a double digit growth from the power sector. In fact in 2007, it had registered the highest (growth) but it was still not double digit. So when we see growth in this sector, we are very encouraged,” the Governor said.

He further underscored the benefits to be accrued from continued investments into the sector as well as other industries such as infrastructure which he said would help address the constraints that impede development and further prop up the economy into the future.

Seasonal rains boosted agricultural productivity which rose by 5.8 percent in the first and second quarters while a 19.6 percent increase in tourist arrivals in July 2010 bolstered the tourism sector.

On the other hand, income tax which is a strong indicator of economic activity was 19.8 percent while overall revenue collection went up by 21.4 percent, a signal that the Kenya Revenue Authority would achieve its targets.

The growth that was taking place in a low inflation, low interest rates-environment in turn saw the country’s overall Gross Domestic Product expand to annual 5.4 percent in the second quarter.

Prof Ndung’u expressed optimism that this pointed to the sustenance of the growth into the third and fourth quarters of the year.

Although a prolonged dry spell has been forecasted, Prof Ndung\’u said this would not affect this year’s economic outlook which is pegged at 5.2 percent but might be reflected in subsequent growth figures.

“If at all there will be La Nina like it has been predicted, it is not going to affect this year’s output but next year’s. These are the supply side issues that are more devastating. There is nothing much you can do about a shock that you cannot protect yourself against; the best we can do to protect ourselves is through food security and all that,” he added.

Other protective measures would include facilitating affordable credit to the private sector which would further support growth.

The CBK, through its Monetary Policy Committee had come up with policy instruments that would assist the banking sector to price their risk and therefore ensure that they are able to able to advance loans to the private sector, which is the country’s engine for growth.


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