Business Daily(Nairobi ANPAK)
The World Bank has revised down Kenya's economic growth rate for this year to 4.7 per cent from the 5.1 per cent forecast it made last December. The Bretton Woods institution said deterioration of security and drought in the first quarter of this year forced the revision despite the economy being strong. "The economy grew by just 2.7 per cent in the first quarter of 2014, mainly as a result of delayed rain in the breadbasket areas of the Rift Valley and increased insecurity.
These shocks caused the bank to reduce its growth projection for 2014 by 0.4 percentage points," the World Bank said. In the first quarter of last year, the economy grew by 5.6 per cent. Releasing the latest Kenya Economic Update (KEU) June 2014 report, senior economist John Randa said that the forecast also reflected low budget execution and tighter global economic conditions. The report, published twice a year, was launched by the bank at Nairobi's Intercontinental Hotel on Thursday. "The projections reflect the effects of the drought, the deteriorating security situation, the low level of budget execution and tighter global credit as the US Federal Reserve winds down its expansive monetary policy," the report said. Government officials have said that maize production will likely fall by up to 20 per cent due to lower-than-expected rainfall in the food basket regions. ALSO READ: World Bank cuts Kenya growth forecast for 2014 There has been optimism that allocation of funds to counties and improving infrastructure will propel economic expansion by more than five per cent this year, up from 4.7 per cent in 2013. The Treasury has forecast 5.8 per cent growth this calendar year and 6.1 per cent for the fiscal year running from next month to June 2015. The Treasury based its bet on the financial boost from the sovereign bond which is expected to set off key infrastructure projects and enhance agricultural production through irrigation. Controller of Budget Agnes Odhiambo said procurement was being reviewed with a view to increasing absorption of funds at national and county government levels. Growth "Ministries, departments and agencies were supposed to forecast cash flows, procurement plans and work plans before the start of the fiscal year so that implementation of projects can be done within the expected time. Monitoring of the implementation is also being improved," Ms Odhiambo said. Despite the growth in export demand, importation of capital goods will continue to slow down growth in the near future. "Despite the increase in exports, however, net exports are expected to slow GDP growth over the forecast horizon, because demand for imported goods is projected to remain strong," said the KEU report.