World Bank report projects higher growth rate of 5.7% in 2013 for Kenya

The World Bank has projected a growth rate of 5.7% for Kenya in 2013, which is remarkably higher than the growth rate of 4.7% recorded in 2012 and the Gross Domestic Product (GDP) is also expected to improve further to 6.0% in 2014.

The Bank indicated that lower interest rates and higher investment will support Kenya’s economic growth in the next two years; the June Kenya Economic Update has shown.

The report points out that the economy is still operating below its potential and remains vulnerable to external shocks, which undermine its prospects for growth and poverty reduction but this, can be cushioned by increasing both domestic and foreign savings.

The Bank’s Country Economist for Kenya and one of the lead authors of the report, John Randa said, “The economy needs structural reforms to improve the business environment and for more Foreign Direct Investment flows to Kenya, “such reforms will include tax and expenditure measures that will increase savings and investment to expand manufacturing exports, taking advantage of Kenya’s low labor costs and its coastal location.”

According to the report, poverty is still quite high, but Kenya has the opportunity to eliminate extreme poverty by 2030 in line with the Bank’s global poverty target, if it reduces poverty by 2% points each year. Such a high rate of poverty reduction is only possible if growth is accompanied by reduction in inequality, to enable the poor benefit, to a disproportionate extent, through new economic opportunities and also by ensuring that safety nets adequately buffer them from vulnerability to shocks.

The Bank urged the government to address poverty by investing in poverty reduction strategies focused on job creation, enhanced productivity of smallholder farms, strengthening cash transfer programmes and targeted public spending programmes to improve quality of education, water, sanitation and access to electricity for the poor in the rural areas.

Improved poverty monitoring is also key to enable the government to rapidly determine which activities have the greatest impact on improving the livelihoods of the poor, it indicated.

By Dorcas Appiah