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Kenya’s economy shows sign of recovery

By | December 1st 2009 at 00:00:00 GMT +0300

By Jackson Okoth

The economy is beginning to ride over effects of the global slowdown and is expected to record positive growth in the third and fourth quarter of this year.

However, this economic recovery will have to be supported by more credit from the banking sector.

But whether banks will respond to signals from Central Bank of Kenya (CBK) to lower lending rates and stimulate growth will be a close watch.

Also under scrutiny is how the Treasury implements the fiscal stimulus package.

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The Monetary Policy Committee (MPC) of CBK has already indicated that effects of various expenditures under this package will become more pronounced in the first quarter of next year.

The easing of food supply constraints following adequate rainfall in October and last month and significant progress in implementation of the fiscal stimulus package provide a basis for continued recovery in the last quarter of 2009, said CBK.

According to the 2009/10 budget, a sum of Sh22 billion was proposed as the economic stimulus package needed to turn around the economy and cushion it from adverse effects of the global financial crisis.

Goods and services

Another Sh1 billion each to free primary and secondary tuition was to be provided to take care of increased cost of goods and services.

A total of 1.5 billion was allocated to upgrade two primary schools and equip them with water harvesting and underground water storage facilities.

A further Sh6 billion (Sh 30 million per constituency) was allocated for the construction of one secondary school as a centre of excellence in each constituency. Other expenditures included recruiting more teachers for primary and secondary schools and purchase of digital laboratory buses. The balance was to finance infrastructure in healthcare and other development projects.

International Monetary Fund (IMF) projects the economy to grow at between three to three per cent this year against the previous 7.1 per cent in 2007 and 1.7 per cent last year.

Available data shows that most of the sectors in the economy are recording positive growth. In July this year, tourist arrivals in Nairobi had reached 83,972 compared to 82,487 in August 2007. Mombasa tourist arrivals in September rose by 26.7 per cent compared to a similar period last year.

Tea production increased by 29.2 per cent, from 21,231 tonnes in August 2009 to 27,434 metric tonnes in September.

"Confidence is also creeping back to the Nairobi Stock Exchange as shown by increased participation by foreign investors in the equity market," said CBK governor Professor Njuguna Ndung’u.

According to MPC, the growth in cement production and consumption also suggest a resilient property sector.

Under the new measurement regime, inflation dropped from 12.39 per cent in April to 6.6 per cent in October.

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