Pan-African bank says Kenya economy strong despite security setback

Kenya has the capacity to absorb the shocks it has been dealt in the recent months and analysts say the economy will achieve projected levels economic growth.

According to African Development Bank ( AfDB) the economy has fundamentals in place that will cushion it from devastating effects or even slow economic growth.
A senior government official also noted that the economy would only suffer a minor setback in the short term and would soon be back on accelerated growth track.
The terror attack at Westgate Shopping Mall that has seen key tourist source markets warn their citizens on travelling to Kenya and the fire in early August that burned down the arrivals terminal at the Jomo Kenyatta International Airport ( JKIA), were expected to deal significant blows especially to the tourism sector.
It was also feared it would dampen the mood among investors planning to put their money in Kenya.
AfDB’s Regional Director for the East Africa Resource Centre, Gabriel Negatu, said Kenya’s economy had in the recent past become increasingly diversified, with different sectors making significant contributions, a factor that has made it more resilient.
Long term
“There will be short term shocks but the economy will be able to withstand these shocks in the long term. The shilling has for instance remained stable throughout last week which is a clear indicator that the fundamentals are right,” he said.
He observed that economy is also getting more diversified with different sectors now playing larger roles in the economy, making it well cushioned to withstand the shocks, adding, “The growth prospects are good.” Negatu spoke yesterday when the bank launched its African Economic Outlook 2013 report that projects the Kenyan economy to grow at between 4.5 per cent and 5.5 per cent this year.
The growth rate is however lower than the regional average, with Africa projected to grow 4.8 per cent in 2013.
The economy experienced moderate growth of between 4.4 per cent in 2011 and 4.2 per cent in 2012 and is expected to reach 4.5 per cent in 2013 and 5.2 per cent in 2014.
According to the report, having witnessed drastic currency depreciation and rapid inflation in 2011, the economy experienced stability for both indicators in 2012. The stability is expected to continue in 2013.
The bank expects inflation to average at 6.3 per cent this year and 6 per cent in 2014. This is against a Central Bank of Kenya’s of 5 per cent.The Government however holds the position that the economy will post a growth rate of over 6 per cent.

Devolution and Planning Cabinet Secretary Anne Waiguru said the government had put in place measures that would ensure sustained economic growth.
“There is a great deal of optimism in the economic performance in the current period, with an economic expansion of 4.6 in 2012 and projections of 6.1 per cent in 2013,” she said.
She said to ensure that the economy remains vibrant, the government is moving towards policies that will ensure less vulnerability to exogenous shocks by addressing structural challenges of the economy.
“At the macroeconomic front, Kenya will seek to maintain inflation below double digits and maintain debt at manageable levels and maintain fiscal discipline,” added Waiguru.
The AfDB report projects a 4.8 per cent economic growth rate for the whole of Africa in 2013 and 5.3 per cent in 2013.
East African countries are expected to post slower growth rates of 3.9 per cent in 2013 and 4.3 per cent in 2014.