Kenya Economic Update: Laying the Foundation for Strong Growth in a Challenging Environment

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  • October 2015

World Bank Kenya

  • The most recent World Bank Group economic update for the country projects that Kenya’s economy will grow at 5.4% in 2015, rising to 5.7% in 2016
  • Economic performance, supported by government investment in infrastructure and consumer demand, remains solid despite challenges emerging from the global financial system, according to the report
  • With support from the World Bank Group, counties are improving citizen participation and strengthening governance and accountability to improve public service delivery at local levels

NAIROBI, October 15, 2015 — Kenya’s economic performance remains solid, with the growth rate expected to improve from 5.3% in 2014 to 5.4% in 2015, according to a new World Bank Group economic report released today. It is projected to rise further to 5.7% in 2016.

The most recent Kenya Economic Update (KEU) attributes the growth to government investment in infrastructure, including railways, roads and energy, and strong consumer demand. The foundation for growth remains strong, the report says, though prospects for higher growth have moderated from the impact of external shocks, including the recent crisis in China and weak global currencies.

“Kenya has the potential to become one of the best performing economies in Sub-Sahara Africa and also among middle income countries,” said Diarietou Gaye, the World Bank’s Country Director for Kenya. “Managing the challenges emerging from the global economic environment will enable the government to deliver on the promise of a more prosperous future for Kenyans,” she added.

The current fiscal expansion presents a risk to growth, the KEU states. The current account deficit also remains high due to poor performance of the export sector, which has wiped out gains from lower oil prices.

“While heavy infrastructure spending is a boon for Kenya’s production space and future growth, the short to medium term fiscal framework is vulnerable to macroeconomic shocks,” said John Randa, World Bank senior economist and lead author of the report.

The KEU also highlights the importance of public participation at local levels. According to the report, county governments, with the support of the central authorities and the World Bank Group, have deepened constitutional and legal provisions for transparency, accountability and public participation to improve public service delivery at local levels.

“Strengthening citizens’ participation through participatory and inclusive processes is critical to the success of devolution,” said Christopher Finch, World Bank senior social development specialist, who is also one of the authors of the report. Setting up structures and systems to facilitate public participation is one of the priorities of the county governments.

The KEU, now in its 12th edition, is prepared by the World Bank Group in partnership with Kenya’s National Treasury and members of the Economic Roundtable. These include the Ministry of Devolution and Planning, Central Bank of Kenya, Kenya Revenue Authority, Kenya Vision 2030, Kenya Institute for Public Policy Research and Analysis, Kenya National Bureau of Statistics, National Economic and Social Council, International Monetary Fund, Office of the Controller of Budget, Council of Governors, Commission for the Implementation of the Constitution, Kenya School of Government and the Center for Parliamentary Studies and Training.