06 March 2015, Nairobi — The World Bank has forecast Kenya’s economy will have a growth of 6 percent in 2015 and rise to 6.6 percent in 2016, owing to falling oil prices and bigger infrastructure investments.
This comes after economists surveyed by Bloomberg Business rated Kenya third in the top 20 fastest growing economies in the world in 2015.
Speaking when launching the Kenya economic update 11th edition, World Bank Kenya Senior Economist John Randa says the country’s infrastructure projects and devolution are expected to firm up growth in 2015.
“The ongoing road construction the Standard Gauge Railway, the LAPSSET project and investments in counties will be the key drivers of the country’s economy in 2015,” Randa said.
He is however wary of the country’s exports growth has been lagging behind that of imports, and urged the country to focus more on the manufacturing sector to boost exports.
He highlighted a weak business environment as a key constraint for growth of the manufacturing sector.
“Manufacturing firms need access to capital for their investments, infrastructure to import inputs and export and distribute finished products, affordable and reliable electricity to produce skilled labour to man their operations and fair and streamlined regulations that allow them to compete,” he stated.
According to the report, Kenya’s manufacturing sector (that contributes about 11 percent to the Gross Domestic Product) has been stagnant in recent years and it has lost international market share. Low overall productivity and large productivity differences in firms across subsectors point to lack of competition which allows low productivity firms to remain in business.
“Kenya needs to continue investing in infrastructure and human capital improve the business and regulatory environment and diversify exports. Increasing exports is crucial for creating the thousands of low skilled jobs needed to reduce high unemployment especially among young people,” the report states.
The report also points out that Kenya has increased its vulnerability to external shocks owing to its entry into the sovereign bond market.
“To protect against such vulnerabilities Kenya needs to preserve and rebuild fiscal policy buffers,” the report indicates.
Kenya’s economy is estimated to have grown by 5.4 percent in 2014.