World Bank projects 5.9 percent economic growth from tourism, agriculture
The global bank, however, says Kenya’s growth projection remains 5.9% in 2016, same as March forecast, but higher than the 5.6% rate in 2015
Kenya’s growth prospects could worsen if banks reduce credit to the private sector and low-income households, the World Bank has warned.
This comes amid fears that lenders might cut off credit flow to the economy due to the recently introduced interest rate caps on loans.
It’s now six weeks since the enactment of the Banking Amendment Act 2015, which caps commercial interest rates at 400 basis points above the Central Bank’s benchmark rate.
In the economic update for Kenya launched yesterday, the World Bank said the country’s growth projection remains 5.9 per cent in 2016, same as the forecast given earlier in March, but which is higher than the 5.6 per cent rate in 2015.
The forecast is a relatively robust performance compared to an average growth of 1.7 per cent forecast for Sub-Sahara Africa in 2016 and will be the eighth consecutive year of growth outperforming the regional average.
“We are happy that Kenya remains one of the bright spots in Sub-Saharan Africa. The prevailing macroeconomic stability means that Kenyans can now enjoy more stable prices for essentials like food, fuel, housing and transportation,” said World Bank country director Diarietou Gaye during the launch of the report in Nairobi.
According to the World Bank, the positive outlook is supported by growth in private consumption, fiscal expansion and the prevailing low oil prices.
Other favourable trends include the surge in diaspora remittances, the diversified structure of the economy, currency stability and low inflation.
Kenya’s economy is resilient enough to withstand the tightening in global financial markets, the reversal in capital flows to emerging markets, and the subdued global demand, which has curtailed trade expansion.
The report, however, states that Kenya through external and domestic factors may face downside risks that may dent future growth prospects.
World Bank Group country director Diarietou Gaye during the launch of Kenya Electricity Modernisation Project in Nairobi on July 22