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January 21, 2019

Kenya rated favourably in World Bank forecast

A worker at a tea plantation in Limuru on January 6, 2019./ENOS TECHE
A worker at a tea plantation in Limuru on January 6, 2019./ENOS TECHE

A vibrant public investment and better output from agriculture are expected to cushion Kenya from the expected global economic slowdown this year.

The World Bank's Global Economic Prospects 2019 report released this week shows that economic activity is expected to remain robust in Sub-Saharan nations that are not dependent on resources, including Kenya, Tanzania and Cote d'Ivoire.

Kenya's positive prospects comes at a time when the bank is warning of darkening skies for the world's economies.

"The global financing conditions continue to tighten,industrial production has moderated, trade tensions have intensified, and some large emerging market and developing economies have experienced significant financial market stress," the report says.

It highlights the high prices of consumables occasioned by the introduction of an eight percent Value Added Tax on petroleum products.

The price pressures are likely to intensify in Kenya, Tanzania, and Uganda as utility tariffs and fuel prices go up.

The World Bank predicts fiscal deficits will also continue to narrow as public investment spending slows to stabilise public debt.

The report says Ethiopia's efforts to stabilise public debt through fiscal consolidation efforts will likely dampen the nation's growth although it is predicted to continue in a strong position.

Smaller economies such as Madagascar, will rely on a solid export performance to boost output.

Inflation is expected to pick up across the Sub-Saharan region due to currency depreciations in 2018 and domestic price pressures among metals exporters and non- resource-intensive countries.

However this will slow down and continue to recede in Angola and Nigeria as overall growth outlook picks 3.4 per cent in Sub-Saharan countries, and rise to 3.7 per cent in the next year.

Per capita income growth is predicted to remain well below its long-term average in many countries, yielding little progress in poverty reduction, and highlighting the need for policy measures to raise potential output while raising the productive capacity of the poor.

Healthy remittance inflows will boost the growth moment while a tighter labour market is expected to drive solid private consumption.

The report says an improving business confidence will drive more expansion in fixed investments, although the prevailing interest rate cap is likely to continue limiting availability of credit for businesses.

National Treasury last October upgraded Kenya’s economic growth projection for this year to six per cent.

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