Rising insecurity hurting Kenya's growth prospects

NAIROBI: Kenya’s economic growth for the financial year 2015/2016 is set to decline, following the insecurity that has adversely affected several industries.

According to the World Bank, persistent security threats from Islamic extremist group Al-Shabaab are eroding Kenya’s economic gains from the falling international oil prices.

“The insecurity we have seen in Kenya first at the Westgate Mall and the recent attack in Garissa are troubling,” said World Bank economist and one of the authors of Africa’s Pulse Report Fransisco Ferreira via video link from the US.

“Tourism in Mombasa and the coastal region has been affected and there are serious consequences from that and it is a real shame because otherwise, Kenya is really poised for a period of sustained growth,” he said.

EXACT FIGURES

The bank could however not give exact figures for the revised growth rate, stating that the exact numbers will be released in June.

In the latest edition of the Africa’s Pulse Report released yesterday in Washington DC, the World Bank says sub-Saharan Africa’s growth rate this year is also set to decline to four per cent, amid falling commodity prices.

“The region’s economic activity is adversely affected by the sharp fall in commodity prices which are still more than 50 per cent lower than they were in June last year,” stated Ferreira.

As one of the countries in the continent that do not rely on commodities or oil exports for economic growth, Kenya is one of the few countries that were poised to earn huge savings from reduced oil prices.

The Bretton Woods institution last month said Kenya’s economy could grow by as much as 6.5 per cent in 2015 buoyed by falling international crude prices and sustained investment in infrastructure.

The World Bank noted the decline in the price of oil would reduce the current account deficit, easing pressure on the shilling. These gains however stand to be eroded following sustained terrorism acts the latest of which occurred in Garissa, where more than 148 people lost their lives.

“Kenya, along with Senegal, is one of the countries that benefit most from falling oil prices because it is a large importer of oil,” stated World Bank Economist Punam Chuhan-Pole.

“However, the security situation is a concern and what needs to be done is more investment in security systems and making sure we have police and armed forces that are up to the job of containing these insecurity situations,” she stated.