NAIROBI, Kenya June 8-Kenya’s gross domestic product (GDP) is projected to grow by 5.5 per cent in 2022 and 5.2 per cent on average in 2023–24, according to the World bank.
This is compared to an earlier projection of 4.9 per cent in December.
The growth rate, while still strong, will be a moderation compared to the 7.5 per cent growth in 2021 following a remarkable recovery from the economic effects of the Covid-19 pandemic.
“While Kenya’s economy has been resilient, the multiple recent shocks show the urgency of improving social protection mechanisms to cushion the most vulnerable households,” said World Bank Country Director, Keith Hansen.
“This will enable Kenya to move away from other more costly and less well-targeted support measures such as fuel subsidies.”
According to the 25th edition of the World Bank Kenya Economic Update, dubbed Aiming High: Securing Education to Sustain the Recovery, the impact of the war in Ukraine is weighing on the global economic recovery from the pandemic.
Domestically, a key risk to the outlook is a further worsening of the current drought, which is having a devastating effect on food security and livelihoods in affected parts of the country and is necessitating increased social spending on food assistance.
The report further notes that Kenya’s economic performance remained strong in the early months of 2022, but external challenges have mounted.
“The economy is vulnerable to the commodity price shocks resulting from the war, particularly through fuel, fertilizer, wheat and other food imports,” said World bank noting that global financial conditions have also tightened sharply, increasing external financing costs.
Even so, Kenya’s exposure to the war in Ukraine through direct trade linkages is small, with Russia and Ukraine accounting for only 2.1 per cent of total goods trade between 2015 and 2020.
Similarly, tourists from Ukraine and Russia do not account for a significant share of Kenya’s tourism market.
The country’s fiscal deficit is seen falling marginally to 8.1 from 8.2 per cent while the ratio of debt to GDP is expected to see a slight uptick to 68 per cent from 67.8 per cent at the end of last year.
“Fiscal consolidation is key to sustaining the recovery, by creating strong conditions for private investment and reopening space for development spending,” said World Bank Kenya Senior Economist, Naomi Mathenge.
Meanwhile, the World Bank expects the rate of inflation to stick below the government’s ceiling of 7.5 per cent at a flat seven per cent at year’s end.
