WB scales down Kenya forecasts

June 3, 2011

, NAIROBI, Kenya, Jun 2 – the World Bank has revised its projections of Kenya\’s economic growth for 2011 to 4.8 percent from an earlier estimate of 5.3 percent.

The downward revision follows high fuel and food costs from January coupled with a forecast of drought that could erode the country\’s economic output.
Latest official figures from the Kenya National Bureau of Statistics show that the Kenyan economy expanded by an impressive 5.6 percent in 2010 buoyed by a significant growth in various key sectors such as agriculture, finance, wholesale and retail.

Picking up from the 2.6 percent Gross Domestic Product (GDP) rate of 2009, the statistics indicated that the improved performance was anchored on a stable macroeconomic environment, favourable weather conditions and increased investments in the country.

Releasing the June 2011 Kenya Economic Update, World Bank Country Director Johannes Zutt said that in the short term, the Kenyan economy would need to navigate through another economic storm and manage rising inflation caused by higher food and fuel prices.

"Kenya is at the beginning of a major transformation that will shape its development prospects for decades to come.

"For 2011, the growth rate is expected to decline to 4.8 percent, half a percent lower than predicted earlier. While this is less than the 5.6 percent achieved in 2010, it is still higher than the average of the last decade," Mr Zutt said.

The Ministry of Planning has indicated that the economy could attain a growth rate of between 3.5 percent and 4.5 percent in 2011. This figure has however been termed as conservative by Finance Minister Uhuru Kenyatta.

"Our projections have revealed that the economy could grow by as much as 6.1 percent in 2011. We are not supposed to paint a dim picture of the economy we should remain optimistic," Mr Kenyatta said on May 19.

Racing inflation which stood at 12.95 percent in May, turmoil in the Middle East (affecting local fuel costs) and rising costs of basic commodities have all played a role in slowing down economic growth in the country.

At the same time, the Bretton Woods institution said that the country\’s economy would grow by five percent in 2012, should next year\’s general elections run smoothly.

The report underlines the need for Kenya to expand and modernise the port of Mombasa as well as to strengthen the competitiveness of its coastal cities, which are Kenya\’s gateway to the thriving markets on the Indian Ocean.

The World Bank also considers the ongoing devolution under the new Constitution an important step in creating dynamic growth poles in Kenya\’s medium-sized cities.

Decentralisation can be inclusive, the report says, if the government invests in social services and basic infrastructure equitably.

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