The World Bank has once again downgraded Kenya’s projected economic growth rate to 5.5 per cent citing heavy headwinds for the country.
In its latest economic update released Wednesday, the global lender said drought, weak credit growth and higher oil prices will drag down growth in 2017 to below the earlier projection of 5.9 per cent made last year.
Potential for fiscal slippages, drought conditions being prolonged beyond 2017 and security concerns during the elections remain critical domestic threats to the economy according to the World bank.
The lender of last resort also cited external risks including weaker growth of trading partners’ economies and uncertainties of the US interest rate hikes that could lead to the strengthening of the dollar and destabilise capital flows from emerging markets.
“While Kenya’s growth has been robust in the recent years, it falls short of the levels envisaged in the in the Medium Term Plan II and what is required to transform Kenya into a upper middle economy by 2030,” World bank said in its bi-annual update of the economy.
It urged Kenya to boost growth in agriculture and access to credit for the private sector in order to put the country back onto a higher growth path.
Kenya’s economic headwinds are however expected to ease next year with a projected growth rate of 5.8 per cent and 6.1 per cent in 2018.
The average growth of 5.9 per cent in 2016 was largely driven by the service sector which contributed up to 3.2 percentage of the growth rate.