NAIROBI, Kenya Jul 19 – The African Development Bank (AfDB) is projecting the Kenyan economy to grow at 5.3 percent in the 2011/2012 fiscal year.
AfDB resident representative Jeremiah Mutonga on Tuesday underpinned the growth to prudent monetary and fiscal policies being introduced by the government to cushion the economy against external shocks.
“Given these prospects the Kenyan economy is forecast to grow by 5.3 percent in 2011 and 5.5 percent in 2012,” Mr Mutonga said.
The Treasury has written to the International Monetary Fund assuring that near term macroeconomic policies will be geared at containing domestic demand pressures that have emerged on the external position boosting investor and donor confidence.
Mr Mutonga said a rebound in regional and global demand supports tourism, and a dynamic private sector has spurred investment and an acceleration of growth across all non-agricultural sectors.
“The country would need to reduce its reliance on agricultural outputs to limit its vulnerability to climate hazards by diversifying the economy,” he said.
The agricultural sector recorded a slowed growth of 2.2 percent in the first quarter of 2011 compared to a growth of 5.7 percent over the same quarter in 2010.
Subdued rainfall during the quarter led to the deceleration in growth as a result of decreased production of a number of marketed products, notably the volume of tea and coffee.
Economic growth in 2011 is also under threat from inflationary pressures, which in June surged to 14.49 percent fuelled by high fuel and food prices. This is matched by a weakening Kenyan shilling that has further fuelled speculation that growth would slow down.
This has in turn exerted pressures on the country’s current account and on domestic prices resulting in the downgrading of the growth forecasts to an average of 4.5 percent by most analysts.
Analysts at PineBridge Investments revised their growth projections to 4.5 percent from 5 percent, while their CfC Stanbic Bank counterparts have cut it to 4.3 percent from 5.4 percent.
Mr Mutonga said the 2011/2012 budget addresses key business issues such as the Business regulation Bill that is likely to spur private sector development.
AfDB has committed resources amounting to Sh97 billion to the Kenyan government.