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Kenya's economy to grow by 6 pct in 2015: World Bank

Xinhua, March 5, 2015 Adjust font size:

The World Bank on Thursday forecast Kenya's economy to grow by 6 percent in 2015 and 6.6 percent in 2016 buoyed by falling oil prices and massive infrastructure projects being undertaken in the country.

The bank also projected the growth to rise from 5.4 percent in 2014 to 6 percent to 7 percent over the next three years (2015- 2017), making it one of the fastest-growing economies in Sub- Saharan Africa.

"Kenya is emerging as one of Africa's key growth centers with sound economic policies in place for future improvement," said Diarietou Gaye, World Bank Country Director for Kenya in Nairobi during the launch of the latest Kenya Economic Update (KEU).

The 11th edition of the KEU said that external and internal balances are expected to improve significantly, thanks to falling oil prices.

In addition, public investment in infrastructure, mainly in energy and standard gauge railways, will strengthen growth in the medium term.

"To sustain momentum, Kenya needs to continue investing in infrastructure and jobs, improve its business climate, and boost it exports," Gaye said.

The report said the country's expansive fiscal policy allowed it to finance major infrastructure projects without putting excessive pressure on domestic financing. It highlights key steps for Kenya to take, including implementing the business reform agenda, completing reforms at the port of Mombasa, improving the efficiency of its massive infrastructural projects, strengthening governance, improving productivity, and continuing to maintain macroeconomic stability.

According to the report, slow demand for exports and declining production is widening the country's current account deficit.

The report suggests that in order to anchor and sustain growth, Kenya needs to boost productivity and improve the business environment to regain and increase its competitiveness.

"Kenya's accommodative monetary policy stance has supported economic activities without triggering inflation or putting pressure on the exchange rate," said John Randa, World Bank Group's Senior Economist for Kenya and lead author of the report.

The manufacturing contribution to exports and growth in Kenya has fallen behind and performance has been less than optimal in the recent years. The report said that a strong manufacturing sector will create more employment, especially for young people in Kenya.

"Kenya needs to increase the competitiveness of its manufacturing sector so that the country can grow, export, and create much-needed jobs," said Maria Paulina Mogollon, World Bank Group's Private Sector Development Specialist.

The report suggests that this will also increase exports and reduce the country's external vulnerability from a widening account deficit. Endi