The World Bank today issued an update on the Kenyan economy indicating that it had reduced Kenya’s economic growth forecast in 2012 from 5% to 4.3%. This it has said is due to the high lending rates experienced in the country earlier in the year. It also predicted that the economy will recover to a growth rate of 5% in 2013.
The growth had taken a nose dive earlier in the year to a low of 3.5% due to high lending rates which hit an average high of 25%. This was occasioned by central bank increasing its base lending rate to 18% to curb high inflation and unstable exchange rate. This meant that key economic sectors such as construction and real estate were slowed down considerably hence the country’s inability to meet its growth projection.
The central bank has since reduced its base lending rate to 11% following a decline of the inflation rate to single digit and the now exchange rates.
However, the World Bank highlighted that the projected growth in 2013 will be highly dependent on the country’s political situation during and after general election scheduled for March 2013. During the post poll chaos of 2007-2008 the economic growth fell from a high of 7% to 2%.
Other factors that might affect Kenya’s growth prospects in 2013 include global economic issues such as the persistent debt crisis in Europe which affects exchange rates and key economic sectors such horticulture and tourism.
Also highlighted was the perennial unemployment problem in county. It is estimated that Kenya produces 800,000 new job seekers every year against 50,000 jobs created by economy in a similar period.
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