In its latest economic update on Kenya, the World Bank cites drought, sluggish credit growth and a prolonged election season as factors that hurt growth this year.
World Bank cuts Kenya's 2017 economic growth estimate to 4.9%
The lender has revised the country's economic growth estimate for 2017.
The lender had already cut its initial forecast by half a percentage point in April, to 5.5 percent, citing the severe drought in the first half and the drop in private sector growth.
“Private sector activity weakened over the first three quarters of 2017 on account of the election induced wait-and-see attitude,” the World Bank said in its report. Kenya’s economic wellbeing is largely driven by the strong performance of its private sector.
A slowdown in credit growth coupled by a a prolonged politicking season hurt the country's key sectors -- agriculture, manufacturing and trade.
The economic slump has however been mitigated by a rebound in tourism, strong public investment (particularly in infrastructure), and relatively low global oil prices.
The lender recommended the removal of the interest rate cap which contributed to the slowing of credit to businesses.
“Removing the interest rate cap can help jump-start domestic credit to the private sector,” the bank said.
World Bank expects the east Africa's largest economy to rebound to a growth of 5.5 per cent next year before accelerating to 5.9 per cent in 2019 if supporting policies are implemented and macroeconomic stability.
"We believe Kenya's economy can rebound and strengthen through specific measures that safeguard macroeconomic stability, enable the recovery of private sector credit growth, and mitigate the impact of future adverse weather conditions on the agri sector," said Diarietou Gaye, World Bank Country Director for Kenya.
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