NewsEast & Horn AfricaKenya's 2015 economic growth forecast still above 6 percent


Posted on Friday, 05 June 2015 07:21

Kenya's 2015 economic growth forecast still above 6 percent

By George Obulutsa in Nairobi

Despite a slowdown in its cash cow sectors, Kenya's economic growth forecast still remains above 6 percent.

The International Monetary Fund said on Thursday Kenya's economy was seen expanding by around 6.5 percent this year, rather than its earlier forecast of 6.9 percent.

East Africa's biggest economy has struggled with a number of challenges in the past year, including attacks blamed on Somalia's al Shabaab militants that have scared away tourists, and periodic droughts that have reduced farm output.

Kenya's economy grew by 5.3 percent in 2014 from 5.7 percent a year earlier, hurt by a slowdown in tourism and farm output.

"Kenya's economy remains resilient in the face of headwinds, with real GDP projected to grow by around 6-1/2 percent in 2015, supported by rising infrastructure investments, lower energy prices, and a dynamic private investment environment," Mauro Mecagni, head of an IMF team visiting Kenya said in a statement.

Mecagni did not say why the IMF trimmed its forecast. Kenya's fiscal deficits were seen rising above targets in both the 2014/15 (July-June) and 2015/16 fiscal years, he said.

The 2014/15 budget had a deficit of 7.4 percent of GDP, and in 2015/16, the National Treasury's Budgetary policy statement for February targets a budget deficit of 8.2 percent of GDP.

"The mission urged the authorities to boost efforts to mobilize domestic revenue and restrain current spending, so as to preserve room for critical priorities, notably closing infrastructure gaps, supporting an orderly devolution process, and strengthening the social safety net," Mecagni said.

He said the shilling's weakening was in line with developments in international financial markets.

The local currency is down 7.8 percent versus the dollar as at end-May.

"The CBK stepped up its monetary operations and has intervened in the foreign exchange market to mitigate heightened volatility of the shilling in recent weeks," Mecagni said.

"Gross international reserves, equivalent to $7.3 billion at end-May, remain adequate." 

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