•While for non-resource-rich countries like Kenya it is projected to strengthen to 5.4 percent in 2024 and 5.7 percent in 2025.
•Industrial commodity exporters in the region, excluding the three largest economies, are forecast to grow by 3.8 percent in 2024 and 4.1 percent in 2025, up from 2.0 percent in 2023.
Image: JACKTONE LAWI
World Bank projects 2024 growth in Kenya will be driven by an increase in credit to the private sector in the hope that state will reduce local borrowing.
The Kenyan government has been pushing to cut domestic borrowing target by Sh270 billion as it shifts the bulk of budget deficit financing to the external markets in an effort to ease pressure on domestic interest rates.
Amid growing concerns that the State was crowding out the private sector in the first half of the year, The multilateral lender foresees the country growing at an average of 5.2 percent as inflationary pressures fade and financial conditions ease.
The rate contained in World Bank’s Global Economic Prospects is an increase from the lenders previous estimation that the country will grow at a rate of 5 percent.
According the report growth in Sub Saharan Africa’s resource-rich countries is expected to pick up in 2024 and 2025.
While for non-resource-rich countries like Kenya it is projected to strengthen to 5.4 percent in 2024 and 5.7 percent in 2025.
“Increasing investment is expected to drive growth in Kenya and Uganda, partly owing to improved business confidence,” says WB
The National Treasury has been forced to rely on the domestic credit market to finance the budget deficit as it is squeezed in part by roadblocks in accessing the international capital markets.
However, with a reduced fiscal deficit, the lender is predicting improved investor confidence and credit to the private sector helped by reduced domestic borrowing by the government.
The lender had in July 2023 cautioned the government over persistent crowding out of the private sector from the local debt market due to heavy borrowing.
The multilateral lender noted that commercial banks have not reached their optimal support for investments as the Treasury continues to compete with households and enterprises for credit from banks.
In Kenya the banking sector remains the largest contributor of credit to private businesses, contributing Sh3.6 trillion Out of the total Sh4.4 trillion extended to the private sector in the period to July 2023.
The largest allocations of this went to trade, manufacturing, and private households at 17.0 percent, 15.7 percent, and 14.5 percent respectively.
The report further notes that Uganda will also benefit from infrastructure investment ahead of new oil production in 2025, and investment in. In Tanzania, reforms to improve the business climate are expected to lift growth.
Industrial commodity exporters in the region, excluding the three largest economies, are forecast to grow by 3.8 percent in 2024 and 4.1 percent in 2025, up from 2.0 percent in 2023.
“This uptick is due to the diminishing impact of the sharp fall in commodity prices from their 2022 peak,” reads the report.
Growth in the non-mining sectors, especially services, is expected to pick up as inflation gradually declines (Botswana, Cameroon, Democratic Republic of Congo).