The World Bank projects that the Kenyan economy will grow by 5.7 per cent in 2013 supported by higher investment and low interest rates.
The World Bank Kenya Economic Update launched Monday attributes the higher growth compared to 4.7 per cent in 2012 to a stable macroeconomic environment, the peaceful elections in March 2013, and smooth transition of political power.
The Gross Domestic Product (GDP) is expected to improve further to 6 per cent in 2014.
“The government needs to create an enabling environment for private sector-led growth by continuing to invest in infrastructure, increasing domestic energy production, removing bottlenecks to doing business and sustaining sound monetary and fiscal policies,” said World Bank Country Director for Kenya Diarietou Gaye.
World Bank notes however that while the economy is still operating below its potential, remaining vulnerable to external shocks which undermine growth prospects and efforts in poverty reduction. This can be cushioned however by increasing both domestic and foreign savings, the report adds.
The Bank’s Country Economist for Kenya John Randa said that the economy needs structural reforms to improve the business environment, including tax and expenditure measures that will increase savings and investment to expand manufacturing exports.
The higher growth should see a decrease in unemployment and poverty levels, World Bank says. The poverty level is estimated to have declined from 47 per cent in 2005 to between 34 per cent and 42 per cent, although the last household survey was conducted in 2005-6.
The report also highlights Kenya’s economic inequalities. While the average Kenyan is healthier, more educated and receives better infrastructure services than a decade ago, it says a large fraction of the population continues to live in fragile conditions with sub-standard access to water, sanitation and energy especially in the north and north east.
Kenya has the opportunity however to eliminate extreme poverty by 2030 if it reduces poverty by two percentage points each year, says the report.
The Bank urges the government to focus on job creation, enhanced productivity of smallholder farms, strengthening cash transfer programs and targeted public spending programs to reduce poverty.