World Bank says Kenyan economy picking up momentum

Friday, 3 December 2010 00:57 - - {{hitsCtrl.values.hits}}

NAIROBI (Reuters) - The World Bank forecast on Thursday that Kenya’s economy will grow by between 5.3-6.0 percent anually over the next two years and raised its projection for 2010 by almost a full percentage point to 4.9 percent.

A strong performance in the agriculture and manufacturing sectors, higher public investment in infrastructure and rising confidence since the adoption of a new constitution will underpin the economic rebound, the World Bank said in its biannual report.

“(Kenya’s economy) could also be at a tipping point in the sense that it may have reached a critical threshold beyond which it may enter a period of sustained growth,” the World Bank said in its Kenya Economic Update.

“Economic growth in 2011 could be 5.3 percent and might even reach 6 percent, approaching levels of growth last seen in 2004-07,” the report said of east Africa’s economic powerhouse.

However, the likelihood of shocks from political instability and drought conditions forecast for early 2011 may dampen the exuberant outlook in east Africa’s biggest economy, it said.

Kenya will hold elections in 2012 after its last vote in 2007 disintegrated into violence that killed 1,300 people.

Its economic growth plummeted to 1.7 percent in 2008 due to a combination of that post-election chaos, the global financial crisis, drought and a food crisis.

It has been recovering since and the government sees expansion of at least 4.5 percent this year. In the past two months some officials have said it could exceed 5 percent.

The World Bank said the farm sector, which accounts for almost a quarter of Kenya’s economy, is projected to grow at 7.6 percent in 2010 on the back of good rains, which has in turn spurred higher activity in the manufacturing sector.

However, the real driver of exponential growth has been the mobile phone sector, the World Bank said. Handsets are not only tools for making calls and accessing the Internet, but have through innovation evolved to be saving accounts as well.

Without the investment in information communication technology, Kenya’s economy would have expanded by only 2.8 percent over 2000-2009, compared with the actual 3.7 percent, the Bank said.

By mid-2010, there were 21 million active mobile phone users in Kenya and the World Bank projects 15 million will be using money transfer services offered by all four operators in the country by the end of this year.

The sector has grown by an average 20 percent annually since 2000, outshining all other sectors.

“Mobile money has the potential to become a game changer for the economy,” the document said.