AFRICA PULSE

World Bank adjusts Kenya's economic growth to 5% in 2021

It expects the country's economy to further grow at an average of 4.8 per cent in the next financial year.

In Summary
  • Growth forecast by the international lender is 50 basis points compared to six per cent growth projected by the Kenyan government last month. 
  • Sudan and Zimbabwe are expected to post average inflation rates that exceed 50 per cent

The World Bank has revised upwards Kenya's economic growth for the current financial year to five per cent from 4.5 per cent projected in June.

The positive outlook is attributed to improvements in the construction, education, information and communication, and real estate sectors.

According to the latest  Africa's Pulse report, the global lender expects Kenya's economy to further grow at an average of 4.8 per cent in the next financial year. 

The lander had previously cut growth forecast for the East African country from 6.8 per cent , which was to be the fastest  in Africa, and a more ambitious prediction than the government's estimate of 6.4 per cent.  

Growth forecast by the international lender is 50 basis points compared to six per cent growth projected by the Kenyan government last month. 

According to the Economic Survey 2021, the  growth in global trade in  is expected to boost external demand for Kenya's products and thereby augment the country's economic growth.

Speaking during the release of the survey last month, National Treasury Cabinet Secretary Ukur Yatani said the key macroeconomic indicators will most probably remain stable.

The economy is therefore expected to record a significant rebound in 2021," Yatani said. 

Yatani said that the full resumption of activities in the education sector and the hotel industry, which were almost halted for the better part of 2020, is likely to significantly boost growth this year.

World Bank expects the country's inflation to remain contained near the central bank objective of 7.5 per cent, and monetary policy continues to support growth.

Government debt is projected to rise from 65.8 per cent of GDP in 2020 to 69.2 percent in 2021.

Sub-Saharan Africa's economy on other hand  is expected to grow by 3.3 per cent this year and 3.5 per cent in 2022, buoyed by rising commodity prices, the lifting of some anti-coronavirus restrictions and a pick-up in global trade.

This is an improvement compared to previous Africa's Pulse report issued in April  which had forecast growth of between 2.3 and 3.4 per cent  this year, after an estimated contraction of two per cent in 2020.

It projects  sub-Saharan growth to rise to 3.8per cent in 2023

Like elsewhere around the world, sub-Saharan Africa imposed restrictions on movement in the first quarter of last year to limit the spread of COVID-19, throttling trade and other key economic activities including tourism and transport.

The World Bank report said growth could turn out to be higher at 5.1per cent  in 2022 and 5.4 per cent a year later depending on how fast Covid-19 vaccinations were rolled out, while a slower inoculation rate would reduce growth projections.

"Slower vaccine delivery and coverage would impede the relaxation of Covid-19 disruptions in economic activity and project growth to slow down to 2.4 per cent in 2023," the report said.

According to World Health Organisation (WHO), half of Africa's states had vaccinated only two per cent of their population by end of September.  Africa, as of end-September.

Inflation in Sub-Saharan Africa accelerated from 3.5 per cent in 2020 to 4.3 per cent in 2021, an increase attributed to higher food and energy prices.

The cost of living is expected  to increase to 4.5 per cent in 2022–23 with a higher  of inflation  projected to peak 7.4 among mineral and metal exporting countries. It is then expected to drop to 4.8 percent in 2023.

Among non-resource-rich countries, inflation is projected to jump from 3.1 per cent in 2020 to 4.0 in 2021, followed by a further uptick to 4.1   in 2022, before declining to 3.8 per cent in 2023.

In contrast, deflationary dynamics are expected in oil-exporting countries, where the inflation rate dropped from 5.8 per cent in 2020 to 3.5 per cent in 2021 and is expected to decline further to 3.3 in 2023.

Within Sub-Saharan Africa, the majority of countries (38 of 47) are projected to register single-digit average inflation rates in 2021, while only two countries will post average inflation rates that exceed 50 per cent (Sudan and Zimbabwe).