World Bank’s January 2024 global economic prospects report projects Kenya's economy to grow at 5.2 per cent this year, an upward projection from last year.
The lender further projects the country’s GDP growth to consolidate at 5.3 per cent in 2024.
It had projected the country’s GDP growth at 5.0 per cent last year, after an upgrade from 4.8 per cent in 2022.
“The upward projection is largely on the back of fading inflationary pressures and the easing of financial conditions,” the lender said in a statement.
Kenya’s December inflation figures eased slightly to 6.6 per cent, down from 6.8 per cent in November and the highs of nine per cent early in the year.
Compared to Tanzania and Uganda, Kenya's prospect this year is the weakest.
The neighbours’ economies are projected to grow at 5.5 and 6.0 per cent, respectively.
Growth for the Sub Saharan Africa is also projected to accelerate to 3.8 per cent in 2024, and firm further to 4.1 per cent in 2025. This from the 2.9 per cent in 2023.
However, the lender cautions that the outlook is subject to several risks.
They include a rise in political instability and violence, such as the intensification of the conflict in the Middle East, disruptions to global or local trade and production, increased frequency and intensity of adverse weather events.
"A sharper-than-expected global economic slowdown, and higher risk of government defaults would also impact the growth," World Bank says.
World Bank explains that an escalation of the conflict in the Middle East could exacerbate food insecurity in the region, as a conflict-induced sustained oil price spike would not only raise food prices by increasing production and transportation costs, but could also disrupt supply chains.
This is despite global food and energy prices retreating from their peaks in 2022, but still cautions disruptions to global or local trade and production could reignite consumer price inflation, especially food price inflation, throughout the region.
“Further, the sharp rise in public debt service costs in many SSA economies since the pandemic has increased the need for debt reduction, particularly in highly indebted countries.”
Nevertheless, World Bank says the regional growth projections in 2024 and 2025 are little changed from June forecasts, but the aggregates mask a mix of upgrades and downgrades at the country level.
“While growth in the largest economies in SSA is expected to lag the rest of the region, non-resource-rich economies are forecast to maintain a growth rate above the regional average.”
Globally, GDP growth has been projected to slow for the third year in a row, from 2.6 per cent last year to 2.4 per cent in 2024, almost three quarter of a percentage point below the average of the 2010s.
The lender attributes the general global slowdown to the prevailing tight monetary policy, restrictive financial conditions and feeble global trade and investment.
The global growth prospect is however expected to rebound in 2025 at a pace of 2.7 per cent.
Global downside risks according to the lender include an escalation of the recent conflict in the Middle East, financial stress, persistent inflation, trade fragmentation, and climate-related disasters.
It thus advocates for global cooperation to provide debt relief, facilitate trade integration, tackle climate change and alleviate food insecurity.
Across all emerging states, proper macroeconomic and structural policies, and well-functioning institutions, are critical to help boost investment and long-term prospects, it adds in part.
