Kenya not out of the woods, yet

• Fast growing imports without corresponding growth in exports putting the country in a delicate situation

Kenya’s economic growth is not out of the woods yet, despite renewed optimism that this year offers better prospects than the last one, a World Bank report warns.

The report titled ‘Walking on a Tight Rope’ says there is risk of a slow-down if the country’s growth is subjected to a sharp rise in international fuel prices, drought and political uncertainty.

This delicate situation, the bank noted, arose due to the country’s fast growing imports without a corresponding growth in exports.

“Kenya’s economy is more vulnerable than ever to shocks due to a large and widening current account deficit. Another oil price shock, poor harvest, or an episode of domestic instability could easily create renewed economic turbulence,” the bank says.

Last month, the country cut its 2012 economic growth projections to between 3.5 and 4.5 per cent from April’s forecast of 5.2 per cent, citing inflationary pressure, high lending rates and political risks ahead of the General Election, as well as the euro crisis in Europe.

Speaking during the report’s launch, the country director for World Bank Johannes Zutt called on the government to re-balance the economy through regional integration.

The report also called for adoption of policies to improve and help in economic growth recovery. This includes maintaining low inflation rates, promoting exports and increasing savings in both the public and private sector.

“The government should increase incentives to encourage investments and reduce its expenditure,” he said.