NAIROBI, Kenya, Sep 15 – Kenya is among Sub-Saharan Africa countries that are expected to make the largest contribution to the region’s economic growth in 2010 and 2011.
Economists from Standard Bank Group believe that the country’s economic prospects are favourable, buoyed by a stable macroeconomic environment, growth in the tourism sector and the heavy spending on infrastructure.
“Kenya’s prognosis is favourable for a variety of reasons. There are vibrant activities in infrastructure; good incomes are abetting consumer spending and of course inflation has been low which in itself a victory is because it alludes to higher real incomes,” stated the Group’s Chief Economist Goolam Ballim.
The economist argued that these developments not only support good performance in the short term, but also create grounds for faster and more sustainable growth in the future.
At a projected annual growth of five percent, Kenya like its neighbours in the region such as Sudan and Ethiopia are expected to remain the strongest growing economies in the region.
The economy is back on a growth trajectory and the government is optimistic that it will register a 5.2 percent growth in 2010 up from the projected four to 4.5 percent that has been forecasted.
But while the country is also riding on the wave of a new Constitution, Mr Ballim cautioned that this should be backed by good policies in order for the country to achieve optimal results.
“Clearly the developments surrounding the referendum are favourable but there needs to be perpetual, constructive political evolution in the market. The government needs to bring effect to good politics in the form of good policies and especially structural and micro economic reforms to ensure enduringly good growth,” he added.
The global economic environment which remains precarious and where a twin recession is expected, is not lost to the economist who was quick to point out that Kenya would be able to leverage on its trade with the emerging economies such as China, India and Brazil as well as its regional neighbours.
This is especially the case with Europe which has traditionally been its largest trading partner but whose economy is fragile but does not pose a major threat to her growth.
“The idea that the recovery in that very wide region is patchy does present challenges to the Kenyan economy. It is comforting though that in the recent past you have good growth rates from select economies,” he pointed out.
The forecasted la Nina however poses a risk to the Gross Domestic Product given the fact that agriculture is still a backbone to the economy both in terms of food security and a threat to a spike in inflationary pressures.
“Rightly, the weather phenomenon does present itself as a fairly significant tail-risk to the Kenyan economy that can, through no fault of policy makers or businesses, serve as an impediment to faster economic performance in the near to medium term,” Mr Ballim pointed out.