World Bank projects Kenya's growth at 5.8 pct for 2019

Source: Xinhua| 2019-10-31 22:11:14|Editor: xuxin
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NAIROBI, Oct. 31 (Xinhua) -- The World Bank has forecast Kenya's growth to hit 5.8 percent for 2019, down from 6.3 percent in 2018.

In its 12th edition of the Kenya Economic Update, the World Bank said that after a strong rebound in 2018, economic activity in Kenya moderated in 2019, primarily due to lower agricultural output and considerably weak private sector investment.

"As a result, the World Bank projects Kenya's growth at 5.8 percent for 2019 and settling at around 5.9 percent over the medium term," it said in its biannual report.

The finding indicates that the east African nation's economy expanded by 5.6 percent in the first half of 2019 which is a deceleration from 6.5 percent in the first six months of 2018.

"While challenges in agriculture account for a significant drag to growth, private investment has also accounted for a share of the deceleration," says the survey.

The report recommends further structural reforms to lift productivity durably.

"Structural reforms could include continued effort to ease barriers for SMEs growth, improving quality of education and skills development at all levels, empowering women, supporting R&D, technology adoption and digitalization," Peter W. Chacha, World Bank Senior Economist said during the launch of the report in Nairobi.

The report notes that agriculture remains a key contributor to growth accounting for at least 26 percent of gross domestic product (GDP) in the last five years.

"Nonetheless, with 83 percent of Kenya being arid and semi-arid lands, dependency on rain-fed agriculture continues to be a source of volatility to the sector's growth performance," said the World Bank.

It noted that Kenya's GDP growth is projected to expand by 6 percent in 2020 and 5.8 percent in 2021.

"The growth outlook is predicated on normal weather conditions, authorities' staying the course in planned fiscal consolidation, and limited spillover effects from the anticipated global slowdown," said the lender.

The findings indicate that favorable weather conditions should support the growth of agriculture and industry at an average of 4.6 percent and 5.6 percent, respectively for 2020-21, while the services sector is projected to continue growing at an average of 6.6 percent over the medium term.

The study says Kenya has experienced steady economic growth in the recent past, with the real gross domestic product (GDP) expanding on average by about 5.6 percent over the last five years.

It said weakening of private investment partly reflects crowding out from widening fiscal deficits and related limited access to credit by the private sector.

"The expansionary fiscal stance has resulted in the crowding out of private sector investment, an unanticipated rise in public debt, and a continuation of slower private sector credit growth," said Felipe Jaramillo, World Bank Country Director for Kenya.

The lender said that the services sector has regularly recorded higher economic growth and typically dominates in the year-on-year sector contribution to GDP growth.