UPGRADE

World Bank lifts Kenya's growth prospect to 5% in 2021

In June, the lender put GDP growth at 4.5 per cent

In Summary
  • The growth has been supported by rebounds in industry and, especially, services.
  • Even so, the forecast is far below that of IMF and the National Treasury. 
Treasury building
Treasury building
Image: FILE

World Bank has reviewed upwards Kenya's growth prospects for the current financial year to five per cent from 4.5 per cent set in June.

According to the lender, Kenya’s economy has demonstrated resilience to the Covid-19 shock, with output in the first half of the year rising above pre-pandemic levels.

According to the 24th edition of the Kenya Economic Update, “From Recovery to Better Jobs,” growth has been supported by rebounds in industry and, especially, services.

Agricultural output, however, fell by 0.5 per cent year on year in the first half of 2021 following a particularly strong performance in 2020, partly due to below-average rains.

Demand-side recovery has been supported by a revival in private consumption, against a backdrop of improving employment conditions and household incomes.

“Kenya’s economy has shown considerable resilience to the enormous shock of the pandemic, and this year is expected to post one of the stronger growth rebounds in the region thanks to diversified sources of growth and sound economic policies and management,'' World Bank Country Director for Kenya, Keith Hansen said. 

Overall economic performance is expected to be robust at 4.9 per cent per year in 2022-23, similar to the pre-pandemic pace (five per cent average annual growth from 2010 to 2019).

The report also projects robust growth in the medium term, taking into account the rebound of some sub-sectors and slower recovery like education and tourism.

The anticipated further recovery of hotels and restaurants, trade, transport, and other services, depends on substantial vaccination progress to help prevent new waves of infections and associated containment measures.

“Recent economic performance has been strong and the outlook is positive, but in Kenya, as everywhere, the future course of the pandemic remains a major source of uncertainty, said Alex Sienaert, senior economist for Kenya. 

As of December 5, Kenya had received a total of 16,201,670 vaccines, with 7,583,134 administered.

While vaccine acceptance is reportedly high there is still a long way to go towards the government’s target of fully inoculating the adult population of about 30 million by the end of 2022.

As of December 6, 2021, about 10 per cent of adults (2.9 million people) had been fully vaccinated while another 16 per cent (4.9 million people) had received their first dose.

Although World Bank says economic growth will be among the fastest in the continent, its forecast is much lower compared to that of the Kenyan government and the International Monetary Fund (IMF).

Last month, IMF downgraded Kenya's growth prospect to 5.6 per cent from 7.6 per cent in March when it reached a financing agreement of $2.3 billion with local authorities.

The lender attributed the downgrade of Kenya's growth to the rebasing exercise which it said lowered the capacity for the economy to realise the previously projected growth.

The National Treasury projects the country's GDP to expand six per cent this year.