Kenya’s economy is projected to grow at 5.9 percent in 2016 up from 5.6 percent in 2015 according to the World Bank’s Kenya Economic Update (KEU) released in Nairobi today.
“We are happy that Kenya remains one of the bright spots in Sub-Saharan Africa with its economic growth approaching 6 percent and outpacing the 2016 regional average of 1.7 percent,” said Diarietou Gaye, World Bank Country Director for Kenya. Kenya’s growth has outperformed the average for the Africa region for over eight consecutive years. The prevailing macroeconomic stability means that Kenyans can now enjoy more stable prices for essentials like food, fuel, housing and transportation.”
Kenya’s overall economic performance has remained robust over the past eight years and this is expected to continue into the medium term with projected economic growth above 6 percent in 2017 and 2018. The key drivers for this growth include; a vibrant services sector, enhanced construction, currency stability, low inflation, low fuel prices, a growing middle-class and rising incomes, a surge in remittances, and increased public investment in energy and transportation.
The positive growth trend is in line with the World Bank Group’s latest Ease of Doing Business Report which pegged Kenya as a top global improver for 2 consecutive years. Kenya moved up to the 92nd spot compared to 113 in the previous year and is now among the top 5 economies in Sub-Saharan Africa where it is easiest to do business.
The report argues that nonetheless, the economy remains vulnerable to potential risks, which if materialize could derail growth momentum. “To sustain Kenya’s growth momentum over the medium term, it will be important to manage risks that may arise such as a subdued global economy, volatility in global financial markets, and domestic shocks such as adverse weather conditions,” noted Jane Kiringai, Senior Economist and Lead Author of the KEU.“ Rebuilding fiscal buffers will provide the necessary policy space to mitigate such potential shocks.”
The special focus of the 14th edition of the KEU roots for reforms to improve Kenya’s system of Public Investment Management (PIM), which has systemic weaknesses, reflected in low execution and cost escalation of infrastructure projects.
“There is potential for Kenya to enhance growth prospects beyond the prevailing levels by increasing the productivity of public investments,” said Jens Kromann Kristensen, Lead Public Sector Specialist and co-author of the report. “Public investment in a range of infrastructure projects is generating strong returns, but the weak execution of some others holds back what could be an even greater catalytic impact of public investment on economic growth.”
The KEU was prepared by the World Bank Group in consultation with the Kenya Economic Roundtable.