Kenya’s economy is projected to expand 5% this year as favorable weather conditions boost agricultural output, according to the World Bank.
The growth rate is expected to accelerate to 5.2% in 2024 and 5.3% the following year, driven by a decline in global commodity prices and robust private investment, the lender said in its Kenya Economic Update published on Wednesday. Gross domestic product expanded 4.8% last year, down from 7.5% in 2021.
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Heavy rains are likely to increase agricultural yields and boost generation of cheap hydro-power, it said in its report. It sees economic growth being moderated by a slowdown in public investment, ongoing fiscal consolidation, higher electricity tariffs and tight monetary policy.
The World Bank also expects the education, hotels and accommodation, and transport sectors to strengthen as the economy continues to benefit from the post-coronavirus pandemic environment of low infections and the easing of travel restrictions.
The lender forecasts that inflation will average 7.8%, up from 7.6% in 2022, driven by a depreciation in the shilling and higher fuel and electricity prices. The inflation rate is expected to decline to 5.7% between 2024 and 2025, “leading to a loose monetary policy in the medium term,” it said.
Kenya’s debt-to-GDP ratio is projected to reach 64.8% this month, 2.6 percentage points lower than a year ago, helped by government’s plans to raise revenue and a slow down in its uptake of debt, the World Bank said.
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Risks to growth in Eastern Africa’s second-biggest economy include below-average rainfall, political tensions and a further tightening of monetary policy by major central banks, the World Bank said.
