Kenya’s growth to fall behind other EA States in two years

Kenya’s economy will grow at a slower pace in the next two years than that of most of her East African neighbours, the World Bank has forecasted.

The Global Economic Prospects report for 2012 released by the bank projects that Kenya will grow by five per cent and 5.5 per cent in 2012 and 2013.

This puts Kenya ahead of only Burundi whose growth rate is expected to be 4.7 per cent in 2012 and 4.9 per cent in 2013 but behind Rwanda, Tanzania, and Uganda.

According to the forecast, Rwanda will maintain the lead despite a marginal slowdown to 7.6 per cent in 2012 and 7.0 per cent in 2013. Last year’s Gross domestic product (GDP) growth estimate for Rwanda was 8.8 per cent.

While growth in Uganda is expected to drop from an estimated 6.3 per cent in 2011 to 6.2 per cent in 2012, Tanzania’s GDP is forecasted to improve from an estimated 6.4 per cent in 2011 to 6.7 in 2012 and 6.9 per cent in 2013.

This vindicates research results released by Standard Chartered bank in November last year that indicated a possibility of Tanzania overtaking Kenya to become the leading economy in the region by the year 2030 if the country maintained consistency in the current growth rate.

Increased spending

Economists at the bank are however optimistic that Kenya will achieve the projected growth rate despite this being a general election year under a new Constitution that will usher devolved government that will call for increased spending by the government.

“We are seeing Kenya’s growth coming from a rebound in agriculture as well as significant growth in industry and service businesses,” said Mr Wolfgang Fengler, lead economist for the World Bank Kenya program yesterday.

He added that the manufacturing industry is set to prosper because of projected regional growth. Growth is also expected to accelerate in telecommunications.

The World Bank report comes at a time when the local economy is recovering from unfavourable exchange rates that had seen the home currency lose its value against world’s major currencies for close to two months to December last year.

Other factors include high cost of imports and fuel price increases that have hurt production costs.