World Bank projects Kenyan economy to grow by 6pc this year
John Otini
The World Bank expects Kenya to be among the fastest growing economies in Africa in 2020 with a 6 per cent growth helped by the repeal of interest rates, but analysts differ.
In its first 2020 growth forecast for sub-Saharan Africa, the Bretton Woods institution said accommodative monetary policy will deliver solid growth but the impact of fiscal tightening will temper the growth.
“In Kenya, growth is expected to remain solid, but soften somewhat as accommodative monetary policy does not fully offset the impact of a fiscal tightening,” the World Bank said in its forecast titled “Global Economic Growth Prospects: Slow growth, Policy Changes.
Head of Research at Kenya Bankers Association Jared Osoro, however, said growth may be slowed by weak household demand, a situation which could see businesses running on excess capacity as less of what they produce gets buyers.
Excess capacity
“If excess capacity and weak household demand point to a large negative output gap, it could tempt an assumption that accommodative monetary policy will make sense,” he said.
Osoro added that the type of assets that banks accumulate may prove whether the repeal of interest rates will fully support growth. KBA estimates that the impact of monetary policy changes is normally felt by the economy in about three months.
President Uhuru Kenyatta repealed the cap on banks’ lending rates last November joining Angola, Botswana,Mauritius and South Africa in adopting more accommodative monetary policy stances.
