Middle income economy possible in 10yrs

February 22, 2011
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, NAIROBI, Kenya Feb 22- The World Bank is optimistic Kenya can attain middle-income status in the next 10 years, going by the economic growth data in the first half of the 2010/2011 financial year.

World Bank Kenya lead economist Wolfgang Fengler said if the country was able to sustain similar growth levels over the next decade, it could beat the Vision 2030 target of being a middle income nation.

Kenya\’s economy has been growing at an average of 5.6 percent in the first half of 2010/2011 financial year with the World Bank projecting between a 5.3 to 6 percent full-year growth rates for the country.

"In the last 10 years the economy grew by a moderate 3.7 percent. If Kenya was to grow as it did in the last quarters and sustain it for the next decade it would be, by our (World Bank) definition, a middle income country," Mr Fengler said.

The World Bank defines a middle income country as one where people live on the $1,000 (Sh81,900) line.

According to the World Bank, key drivers for that level of growth will come from infrastructure development, agriculture and the telecommunications sectors.

However, there are a number of shocks facing the country that Mr Fengler said the government would need to address if it was to attain such growth.

"There are three potential shocks we see touching on draught as witnessed in 2009, political instability and obviously the instability in the Middle East which is a major trading partner for Kenya," Mr Fengler said.

Kenya, the world\’s biggest exporter of black tea and generates about 25 percent of economic output and half the country\’s foreign-exchange earnings.

Fitch Ratings a company that gives credit rating for a country on Monday indicated that the drought could put severe strain.

Growing political tension in the country has also emerged as a major detractor towards creating a favourable investing environment.

World Bank Country Director Johannes Zutt said for economic growth to continue and sustain positive levels, it would be imperative to have an attractive investment climate.

"Potential investors looking at Kenya will be interested to see how well the government is managing and execute decisions necessary to keep the economy moving forward," Mr Zutt said.

He pointed out that if politics in Kenya distracts the government from undertaking its core economic functions it would be a drag on growth.

He said Kenya\’s economy has on four occasions dropped sharply on election years.

"Political leaders in Kenya need to remain focused on what is necessary for the economy to grow even when they are in the middle of a campaign to achieve economic and political maturity to support the strong economic growth," he added.

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