The World Bank has projected Kenya’s economy to grow by 5.7 per cent in 2019, down from estimated growth of 5.8 per cent in 2018, an official said on Tuesday.
Peter Chacha, Senior Economist at World Bank Group, said in Nairobi that the economic slowdown was partly due to a potential drag from drought conditions in the country.
“The medium-term growth outlook is stable but recent threats of drought could drag down growth.
“GDP growth is projected at 5.7 per cent in 2019 after accounting for potential drag from drought, rising to 5.9 per cent and six per cent, respectively in 2020 and 2021.
“This is supported by private consumption, a pickup in industrial activity and still strong performance in the services sector,’’ Chacha said during the release of the 19th edition of the Kenya Economic Update.
Chacha noted that currently Kenya’s growth was also being supported by ongoing key investments to support the implementation of the country’s national development blueprint, the “Big Four Agenda” as well as improved business sentiment.
He added that a strong pick-up in economic activity in the first quarter of 2019 was reflected by real growth in consumer spending and stronger investor sentiment.
“Nonetheless, a delayed start to the March-May 2019 long rainy season could affect the planting season-resulting in poor harvests,’’ he revealed.
According to the report, performance in the services industry is projected to remain stable as the sector is expected to grow at an average rate of 6.5 per cent over the medium term.
The study indicates that private consumption is expected to continue spurring growth even as government consumption tapers due to fiscal consolidation.
The report shows that recovery in private consumption is underpinned by improving purchasing power, especially due to a growing middle class, low inflation and solid remittances inflows.
The review also urges the government to fast-track a comprehensive solution to factors that led to the imposition of interest rate caps for an eventual repeal of the caps and revival of the potency of monetary policy.
“The continued retention of interest rate caps has constrained monetary policy space,’’ says the survey.