Kenya’s economic growth to slow to 5% next year, World Bank says

NAIROBI (Reuters) – Kenya’s economic growth will slow down to 5% next year from an estimated 5.5% this year, the World Bank said on Thursday, as the rebound from the impact of the coronavirus pandemic loses momentum.

East Africa’s biggest economy could also see a drop in demand for its horticulture exports and visits by tourists from advanced economies due to a global downturn in economic activities, the bank said in its Kenya Economic update report.

“On the domestic front, risks can emanate from fiscal slippages,” the bank said in anticipation of higher spending by President William Ruto’s government.

Ruto rode into office in September on the promise of alleviating high costs of living for citizens, which could put pressure on the budget, the bank said.

Higher spending could cut the amount of credit available to businesses and increase the government’s debt, the report said, with higher borrowing costs likely to exacerbate the situation.

Policymakers have hiked the benchmark lending rate three times since May this year to arrest inflationary pressures.

Growth is expected to edge up to 5.3% in 2024, the World Bank said, supported by increased private investments.

Kenya’s economy had one of its fastest growth rates in 2021, growing at 7.5%, as it recovered from its first contraction in nearly three decades in the previous year due to the pandemic.

(Reporting by Duncan Miriri; Editing by Arun Koyyur)