World Bank cuts Kenya's growth estimates

The World Bank on Tuesday revised its growth projections for Kenya sharply downwards forecasting that the country’s economy would expand at a 2.4 per cent rate this year and 3.4 per cent in 2010.

In November last year, the bank was forecasting a moderate growth rate for Kenya of 3.7 per cent in 2009 and a vigorous 5.9 per cent for the following year.

The bank’s more pessimistic outlook for Kenya roughly corresponds with its lowered expectations for sub-Saharan Africa as a whole and for the full range of developing countries.

Kenya’s projected economic performance for this year lags the bank’s estimate for black Africa by nearly half a percentage point.

At the same time, the anticipated fall-off for Kenya is not as precipitous as for the developing world generally, with the World Bank in that case more than halving the projections it made six months ago.

Global trade is experiencing a contraction unprecedented in modern history, the bank notes. As a result, world output is expected to fall for the first time since World War II.

Developing countries such as Kenya “have been directly hit in their domestic economies by the financial crisis,” the bank says in its update.

“The reversal of capital flows, collapse in stock markets, and in general the deterioration in financing conditions have brought investment growth in the developing countries to a halt, and in many developing countries investment is sharply declining.”

Although the bank foresees an rise in Kenya’s growth rate next year, the new forecast emphasises the uncertainty of such predictions.

“Lost wealth and knock-on effects from the financial crisis continue to dampen economic activity,” the bank observes.

“The pace and timing of the recovery is still highly uncertain.”