Treasury forecasts a 5.6pc economic growth this year
Treasury secretary Henry Rotich has justified the growth forecast, dependent on stabilising macroeconomic prices. Photo/File
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It pegs the projected growth to on-going structural reforms in government departments alongside expected increase in the country’s exports as the global economy recovers.
The global economy is forecast to improve marginally pushing up demand for Kenyan produce.
The report further projects growth of up to 6.6 per cent in the next two years.
Kenya’s economy is expected to grow by 5.6 per cent this year up from 4.7 per cent of last year aided by a buoyant agriculture sector and expanded infrastructure, the Treasury says in a newly released report.
It pegs the projected growth to on-going structural reforms in government departments alongside expected increase in the country’s exports as the global economy recovers.
The global economy is forecast to improve marginally pushing up demand for Kenyan produce.
Adequate rain and the recent government drive to revamp irrigation schemes in the country to boost food security are also seen lifting production.
The report further projects growth of up to 6.6 per cent in the next two years.
“In terms of fiscal years, the projection translates to 5.9 per cent for 2013/14, 6.3 per cent for 2014/15 and 6.6 per cent for 2015/16,” the document titled Post-Election Economic & Fiscal Report says.
“Domestic demand is expected to be robust following a drop in inflation, and increased investor confidence following the successful general election.”
Treasury secretary Henry Rotich on Wednesday justified the growth forecast citing first quarter growth as an indicator of the country’s fortune going forward.
The country’s economy expanded to 5.2 per cent in the three months to March compared to 4.6 per cent in a similar period last year. Mr Rotich says stabilising macroeconomic prices will be crucial to achieving the growth.
“A stable macroeconomic environment is a critical prerequisite for financial services development,” he said.
Top rating
The optimism comes two months after the World Bank upgraded Kenya’s Policy and Institutional Assessment (CPIA) rating to 3.9 as a result of its effort to improve policies to boost institutional growth and reduce poverty.
This lifted Kenya to the highest rated country in sub-Saharan Africa in institutional and policy reforms.
“In addition, we have been able to maintain a favourable sovereign credit rating of B1 by Moody’s and B+ by Fitch and S&P and are in the process of issuing our first Sovereign Bond in the international markets,” Mr Rotich said.
Robert Shaw, an analyst, said a one percentage increase in growth is possible on the back of increased agricultural production due to adequate rain and relatively stable inflation. But a drop in tea prices by as much as 25 per cent could hinder the growth.
The projection, however, comes against a backdrop of increased fuel prices, which could raise inflation further. A worsening trade balance could also hinder realisation of the target.
Inflation rose to a one-year high of 6.02 per cent in July driven by a mix of rising cost of housing, fuel and transport. The cost of living measure had fallen to 9.4 per cent last year down from 14 per cent in 2011.
Kenya’s exports grew to Sh517.8 billion last year from Sh512.6 billion the previous year while imports grew by 5.7 per cent to Sh1, 374.6 billion Value of agricultural production rose 3.9 per cent to Sh344.6 last year.
Kenya is also counting on foreign investment to boost growth.
