By John Oyuke
World Bank expects economic growth in Sub-Saharan Africa to reach 5.3 per cent this year, driven by recovery in the global economy.
Growth in the world’s poorest region is expected to pick up from an estimated 4.7 per cent last year, the Bretton Woods Institution said in its latest Global Economic Prospects 2011 report.
Excluding South Africa, which continues to deal with capital inflows and exchange rate appreciation, growth in Sub-Saharan Africa is estimated at 6.4 per cent this year, before settling at 6.2 per cent next year.
This will make sub-Saharan Africa one of the fastest growing regions. According to the report, growth in Sub-Saharan Africa bounced back strongly last year, supported by external and domestic developments.
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For instance, the Bank said Kenya’s economy returned to higher growth, thanks to a rebound in the agricultural and industrial sectors.
The country’s economy is estimated to have grown five per cent last year. The rebound in the agriculture sector has been helped by favourable weather conditions and an increase in the area under irrigation.
Agriculture exports, particularly tea (up 50 per cent in volume terms), has supported the upturn — although horticultural exports were hampered by the weak recovery in Europe and the Iceland volcanic ash crisis in April last year — which cut into time-sensitive deliveries.
Counter cyclical fiscal policy helped firm domestic demand last year, with government investing heavily in domestic infrastructure.
The passing of the new Constitution and the strengthening of regional integration efforts in East Africa has also created new prospects for local businesses, says the report which projects steady global growth.
It adds that remittance flows to Kenya rose to $1.8 billion last year, observing that this amount was higher than each of the traditional foreign exchange earners, tourism, tea and horticulture.
Kenya also continues to benefit from productivity gains that growth in its dynamic information and communications technology sector brings to its economy, for instance banking, trade and health services.
The report says the ICT sector alone is estimated to have accounted for 13 per cent of growth in Kenya’s economy over the past decade.
However, there remain risks to growth over the forecast horizon.
These, according to the report, include a faltering of the global recovery and contagion from the euro area sovereign debt crisis.
Other risks to the sub-Saharan region are slower growth in Europe due to fiscal austerity measures, higher than expected increase in food and oil prices, poor weather conditions and political risks associated with a number of upcoming elections.
"Strong developing-country domestic demand growth is leading the world economy, yet persistent financial sector problems in some high-income countries are still a threat to growth and require urgent policy actions," said Justin Lin, World Bank’s chief economist and senior vice president for development economics.