NAIROBI, Kenya, Jul 8 – The International Monetary Fund (IMF) is projecting that the Kenyan economy will grow at 5.7 percent in the 2011/2012 fiscal year.
The Fund is basing this growth trajectory on the positive performance of the tourism sector following the global economic recovery and a robust private sector.
“We project GDP growth at 5.7 percent for 2011/12, up from 5.4 percent in 2010/11. 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,” said Domenico Fanizza, the head of the IMF team.
The country’s economy expanded by 5.6 percent in 2010 buoyed by increased private and public investments. This momentum was sustained in the first quarter of 2011, which posted a 4.9pc growth.
The government’s efforts to create an enabling environment have eased lending to the private sector and supported a positive outlook for privaten investments.
The country is also attracting new foreign investors, which further reinforces the upward trend in capital expenditure by firms already operating in the country.
However, although most of the sectors are registering positive growth, the same cannot be said of agriculture which has been negatively impacted by the ongoing dry spells in various parts of the country.
“Strong growth continues in 2011, with the exception of the agricultural sector, expected to decelerate significantly as a result of weather disturbances in the first months of the year. Agriculture growth is expected to decelerate sharply because of delayed rains during the main rainy season (April-June),” Mr Fanizza stressed.
Further, the economy is been threatened by inflationary pressures which in June surged to 14.49 percent fuelled by high fuel and food prices.
This has in turn exerted pressures on the country’s current account and on domestic prices and resulted in the downgrading of the growth forecasts to an average of 4.5 percent.
In addition, many experts reckon that this calls for a tightening of the monetary policy to preserve macroeconomic stability that policy makers have managed to attain in the last few years.
The government has however assured that it is aware of what it’s dealing with and plans to implement several interventions to ensure that the country remains on its growth trajectory.
“Near term macroeconomic policies will be geared at containing domestic demand pressures that have emerged on inflation and the external position. The key priorities for the near- and medium-term remain the implementation of our new Constitution, enhancements to the country’s infrastructure, investments in the energy sector, and adequate allocations to the social sectors,” Finance Minister Uhuru Kenyatta responded in a Letter of Intent to the IMF.