Kenya’s economy is likely to expand by 6.0 per cent in 2020, rising from the projected growth of 5.8 per cent this year, due to a favourable weather outlook, the World Bank said on Thursday.
The bank said, in its biannual report on Kenya’s economy, that “The (2020) growth outlook is predicated on normal weather conditions that planned fiscal deficit cuts by the government will also help”.
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East Africa’s biggest economy has grown by an average of more than five per cent in the last five years but investors have been concerned about growing public debt, which nominally rose to 62.3 per cent of GDP in 2018 last year, from 59.1 per cent previously.
The Treasury has already indicated it is reviewing its budget for the current financial year to cut the government’s expenditure and set more realistic revenue collection targets.
Patrick Njoroge, the bank’s governor, said last month that the central bank would embark on a monetary easing stance if the fiscal cuts were sustained to attain a balance.
The World Bank, however, warned that its latest growth forecasts faced risks such as potential droughts, failure by the government to cut its fiscal deficit and a slowdown in global growth.
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The World Bank welcomed the prospect of the removal of a cap on commercial lending rates, saying it could boost the economy.
In 2016, the government capped commercial interest rates at four percentage points above the central bank’s benchmark rate, accusing lenders of failing to offer affordable credit.
President Uhuru Kenyatta refused to sign this year’s budget this month, demanding lawmakers remove the cap.
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Lawmakers are due to decide on the cap on Monday.
Kenyans have questioned the quality of the current robust annual economic growth rates, citing widespread unemployment.
