The World Bank has cut its 2017 growth estimate for Kenya’s economy to 4.9 percent, due to weak credit extension and political uncertainty due to prolonged election season.
The World Bank has termed the growth its “ weakest in five years”.
“Despite this slump, economic activity has remained favorable compared to the East African regional average. This resilience has emanated from a rebound in tourism, strong public investment, and relatively low global oil prices,” noted the World Bank in their newly released Kenya Economic Update themed “Poised to Bounce Back” Reviving Private Sector Credit Growth and Boosting Revenue Mobilization to Support Fiscal Consolidation.
Further “There is a need to consolidate the fiscal stance in order not to jeopardize Kenya’s hard-earned macroeconomic stability,” the World Bank said.
Kenya must also “jump-start the recovery of credit growth to the private sector”, “Improved access to credit requires lowering the cost of credit, removing the interest rate cap, the universal adoption of credit scoring, and accelerating the collateral registry,” it said.
“It’s important that the private sector is re-energised so it can contribute towards a more robust economic rebound,” said Allen Dennis, the lead author of the review.
The bank reduced the 2018 growth forecast to 5.5 percent from 5.8 percent in April, and cut the estimate for 2019 to 5.9 percent from 6.1 percent, it said.
The Central Bank of Kenya (CBK) expects the economy to expand 5.1 percent in 2017 from an initial projection of 5.7 percent.
The 2018 economy will be more ‘dynamic’ said Dr. Patrick Njoroge, the CBK Governor after the CBK Monetary Policy Committee retained the Central Bank Rate (CBR) at 10.0 percent citing a decline in inflation pressures.
“Kenya’s economy has been surprisingly resilient in 2017. There’s a very strong macro framework: inflation is firmly anchored; an organised and stable forex market; good yield curve,” he said on Wednesday during the World Bank economic update.