World Bank downgrades Kenya's growth to 5 percent

The National Treasury building in Nairobi. PHOTO | SALATON NJAU | NMG

The World Bank has downgraded Kenya’s 2023 growth outlook to 5 percent amid concerns over increased commodity prices including fuel and the effects of an ongoing drought.

The Bank had earlier projected the country’s growth at 5.5 percent but the prospects have been dampened by high inflation rates and food insecurity that has hit the Horn of Africa.

Adverse weather conditions have exacerbated inflationary pressures caused by supply chain disruptions and the war in Ukraine.

“Kenya is set to grow at 5 percent in 2023 –down from 5.5— and back up to 5.3 percent in 2024,” the World Bank said in the Kenya Economic Update.

The bank said noted the slowdown in economic activity reflects weak private consumption associated with a contractionary monetary policy on the back of high inflation.

Kenya’s inflation climbed to 8.5 percent in August from 5.4 percent at the beginning of the year, breaching the Central Bank of Kenya’s (CBK) 7.5 percent ceiling target band.

World Bank chief economist for Africa Andrew Dabalen warned it is imperative that policymakers— including central banks— bring inflation under control.

“If inflation is left unchecked and it runs rampant, it is the fastest, one of the surest ways of increasing the ranks of the poor,” he said.

Overall, global headwinds continue to slow down Africa’s economic growth as countries continue to contend with rising inflation, hindering progress on poverty reduction.

The risk of stagnation comes amid high-interest rates and debt which are forcing African governments to make difficult choices as they try to protect jobs, purchasing power and development gains.

The Bank analysis shows that economic growth in Sub-Saharan Africa (SSA) will slow down to 3.3 percent this year from 4.1 percent recorded in 2021.

The analysis published in the Bank’s Africa’s Pulse shows the slow growth is mainly a result of a slowdown in global growth, including flagging demand from China for commodities produced in Africa.

Kenya’s rebound from the Covid-19 pandemic has been weakened by severe drought and the global headwinds that have impacted supply chains.

The East African region—which includes Ethiopia, Kenya, Somalia, South Sudan, Sudan, and Uganda—is experiencing the worst drought in four decades and bracing for its fifth consecutive failed rainy season, with close to 20 million people facing starvation.

This is the third severe drought in a decade. Millions of people—especially women, children, and the elderly—have been driven into extreme poverty, food insecurity, and acute hunger and malnutrition.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.