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

The Star (Kenya) - - Front Page - CYN­THIA ILAKO AND RICHARD MUNGAI @Richiy­mungai

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.

/ENOS TECHE

World Bank Group coun­try di­rec­tor Dia­ri­etou Gaye dur­ing the launch of Kenya Elec­tric­ity Mod­erni­sa­tion Project in Nairobi on July 22

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