World Bank gives Kenya's economy thumbs up, warns against threat of terror

Kenya’s economy has shrugged off the effects of subdued growth in the continent but still faces threats from terrorist attacks, a new report says.

A new World Bank report puts Kenya among the improved growth performers at a time when the global lender revised sub-Saharan Africa’s growth in 2015 to 1.6 per cent down from three per cent in 2014.

However, the Bretton Woods institution in its twice-yearly analysis of economic trends in Africa warned against increased “militant insurgencies and terrorist attacks.” “Among other risks, an increase in militant insurgencies and terrorist attacks would adversely affect activity in several countries, including Burkina Faso, Côte d’Ivoire, Kenya, Mali, and Nigeria,” reads the report in part.

Terrorist attacks from the Somali-based terror group Al-Shabaab have caused great suffering in Kenya, with the tourism sector bearing the brunt.

Although terrorist attacks have lately been few and far in between, pockets of attacks have still been witnessed in the North Eastern part of the country. The report, titled Africa’s Pulse: An Analysis of Issues Shaping Africa’s Future, also cites National Government’s tight-grip on devolution as a threat to participatory budgeting.

It notes that the top-down budgeting process in Kenya and Uganda in which the National Government “earmarked transfers to devolved units”constrained the participatory budgeting process. Nonetheless, the report recognises the country’s impressive growth performance and “economic management” ranking it among “improved growth performers” alongside Benin, Cameroon, Côte d’Ivoire, the Democratic Republic of Congo, Senegal, and Togo.

The group of improved performers saw their GDP growth rate increase from 2.9 per cent in 1995 to 2008 to 5.8 per cent in 2014 to 2016. Kenya recorded a 5.6 per cent growth in 2015, up from 5.3 per cent in the year before, according to the Economic Survey 2016.

“Activity in Kenya is also expected to continue to expand at a steady and robust pace, driven by private consumption and public infrastructure investment. As a large commodity importer, Kenya continues to benefit from low oil prices, which have helped stabilise the Kenyan shilling and keep inflation within the target,” read the report.

Kenya and Senegal displayed the highest scores in economic management among the improved performers by 2015. The report noted that the shilling had remained stable due to the country’s export growth. Among the improved performers, Cameroon, Côte d’Ivoire, Kenya, and Senegal have increased the number of destinations for their exports over the past 10 years, while Rwanda is the only country among the established ones with significant progress in market diversification.

SLIPPING

However, Tanzania, Rwanda and Ethiopia were put in higher-ranking established growth performers whose other members include Mali, Mozambique and Tanzania. This group houses about 21 per cent of the population of sub-Saharan Africa and produces nine per cent of the region’s total GDP.

Commodity-dependent countries of Angola, Botswana, Cabo Verde, Chad, Equatorial Guinea, The Gambia, Liberia, Madagascar, Nigeria, Sierra Leone, and South Africa, whose GDP has been decelerating, were put under the “Slipping” category. However, despite its impressive growth, Kenya has not done enough to reduce its fiscal deficit which has remained “elevated” according to the report. This might be due to the huge infrastructural projects the Government is currently undertaking against a backdrop of subdued revenues, and increased appetite for both domestic and foreign loans.

The report also notes that Kenya was among the few countries that were affected negatively by the decision by the United Kingdom to break away from the European Union with the stock prices going down by two percentage points two days after the citizens of the UK voted to exit the common market.