Nairobi, June 2, 2011—Kenya could become a middle income country in the next decade if its economy grows at six percent a year, says the latest World Bank analysis.
The June 2011 Kenya Economic Update launched today also shows that Kenya is on the threshold of a major demographic transition and rapid urbanization, which could have a positive development impact if well managed.
“Kenya is at the beginning of a major transformation that will shape its development prospects for decades to come,” says Johannes Zutt, World Bank Country Director for Kenya. “Every year, Kenya’s population grows by about one million people, who are healthier, better educated and moving to cities. With improved urban infrastructure and connectivity, particularly through the port of Mombasa, Kenya’s new entrepreneurs will increasingly find new paths to prosperity.”
In the short term, the Kenyan economy will need to navigate through another economic storm and manage rising inflation caused by higher food and fuel prices, says the report. For 2011, the growth rate is expected to decline to 4.8 percent, half a percent lower than predicted earlier. While this is less than the 5.6 percent achieved in 2010, it is still higher than the average of the last decade.
“Kenya can achieve higher growth of at least six percent per annum in the medium term,” says Wolfgang Fengler, the Bank’s Lead Economist for Kenya. “The challenge is to sustain high growth over several years. Then Kenya can reach middle income status in the current decade.”
The report, the fourth in a series, indicates that, by 2033, half of Kenya’s population, or 33 million people, will be living in the cities. The theme of the report, turning the tide in turbulent times, reflects the challenges and opportunities that the Bank sees as Kenyans strive to improve their growth and incomes.
The report underlines the need for Kenya to expand and modernize the port of Mombasa as well as to strengthen the competitiveness of its coastal cities, which are Kenya’s gateway to the thriving markets on the Indian Ocean. It should also improve the infrastructure within and between Mombasa and Nairobi—Kenya’s gateway to East Africa and beyond.
The Bank also considers the ongoing devolution under the new constitution an important step in creating dynamic growth poles in Kenya’s medium-sized cities of 100,000 – 400,000 people. Decentralization can be inclusive, says the report, if the government invests in social services and basic infrastructure equitably.
The World Bank’s half-yearly economic reports on Kenya are prepared in close partnership with Kenyan stakeholders, including the Central Bank of Kenya, the Office of the Prime Minister, the Ministry of Finance, the Ministry of Planning and National Development, the Kenya National Bureau of Statistics and the Kenya Institute for Public Policy Research and Analysis.