The World Bank cut Kenya’s economic growth forecast for this year by half a percentage point on Wednesday to 5.5 per cent, citing drought, sluggish private sector credit growth and rising prices of oil.
The country is estimated to have expanded by 5.9 per cent last year, the highest annual expansion in half a decade.
However, the outlook has been hit by months of dry weather, that left 2.7 million people in need of food aid, and a drop in annual private sector credit growth to four per cent in February from 17 per cent at the end of 2015.
In its latest report on the Kenyan economy, the World Bank said growth would pick up after this year, driven by the expected normalisation of rainfall, a firmer global economy, a rebound in tourism and the resolution of challenges curbing credit growth.
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“GDP growth is expected to accelerate to 5.8 per cent and 6.1 per cent in 2018 and 2019 respectively,” the bank said.
The main risks facing the economy were the weather and any slowdown in economies of major trading partners, the bank said.
It urged the government to stick to its fiscal consolidation path and to review last year’s changes to the banking law, which capped commercial lending rates at four percentage points above the Central Bank rate.
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