The World Bank has cut Kenya's economic growth forecast to 4.3 percent in 2012 from an earlier 5 percent due to the effects of high lending rates, before recovering to 5 percent in 2013.
Growth slowed sharply in the first half to 3.5 percent, as key sectors like construction sagged under the weight of high commercial lending rates that topped 25 percent after policymakers raised The Central Bank of Kenya's rate to 18 percent to fight inflation.
"During 2012, inflation declined sharply and the exchange rate stabilised and debt levels remained sustainable. But creating this macroeconomic foundation came at a cost. Projected growth will not meet our earlier expectations," the bank said in its latest economic update report for Kenya.
The central bank has since reduced the policy rate to 11 percent after inflation tumbled into single digits. Year-on-year inflation fell to 3.25 percent last month.
The 5 percent growth prediction for 2013 will depend on a presidential election scheduled for March 4 conducted peacefully, the World Bank said. A disputed result in the last election in 2007 led to ethnic killings in the country, leading to severe economic disruptions.
-Reuters
