The World Bank has once again lowered Kenya’s projected economic growth rate to 5.5 per cent citing heavy headwinds for the country.
In its latest economic update released on Wednesday, the global lender said drought, weak credit growth and higher oil prices will drive down growth of the economy in 2017, falling below the earlier projected 5.9 per cent last year.
Potential for fiscal slippages, drought conditions lasting beyond 2017 and security concerns during the elections remain critical domestic threats to the economy, according to WB.
The lender of last resort also cited external risks, including weaker growth of trading partners’ economies, uncertainties of the US interest rates hikes that could lead to the strengthening of the dollar and destabilise capital flows from emerging markets.
“While Kenya’s growth has been robust in the recent years, it falls short of the levels envisaged in the Medium Term Plan II and what is required to transform Kenya into an upper middle economy by 2030,” WB said in its bi-annual update of Kenya’s economy.
The lender said Kenya must boost growth in agriculture, and that access to credit for the private sector will be the key in putting the country back onto a higher growth path.
Kenya’s economic headwinds are, however, expected to ease next year, with a projected growth rate of 5.8 per cent and 6.1 per cent in 2018.
The average growth of 5.9 per cent in 2016 was largely driven by the service sector, which contributed up to 3.2 percentage of the growth rate.