NAIROBI– The World Bank expects Kenya’s economy to expand by 5.5 per cent this year on account of favourable weather and increased investments resulting from low political risk.
The Bank says the projection is also hinged on the likely review of the interest rate cap issue and a reversal of the decline in credit to the private sector.
The economy grew by an estimated 4.8 per cent in 2017, which is the lowest growth rate in the last five years. The World Bank says economic growth in Kenya will accelerate to 6.1 by the year 2020, but Kenya needs to recalibrate its budget deficit and boost development expenditure.
The National Treasury has embarked on various austerity measures to cut expenditure by 1.4 per cent this year. The most affected will be the development expenditure vote.
World Bank chief economist Allen Dennis has cautioned against the Treasury’s move to cut the development funding saying this risks reducing the capital stock of the economy which may have implications for long-term growth.
The World Bank says Kenya should instead trim the wage bill by harmonizing the salaries and wages of civil servants, especially those in the top salary groups.
Kenya’s debt is seen hitting an all-time high of 55 per cent of gross domestic product (GDP) by end-June this year, from 40.6 per cent in the 2011-12 fiscal years.
The Bank is cautioning the National Treasury against a borrowing binge in the face of shrinking revenue margins.
The annual economic report by the World Bank says the impact of private sector investment on growth has fallen to -0.7 percentage point of GDP in the four years to 2017, from 1.3 percentage points in the four years to 2013.
Source: NAM NEWS NETWORK