The East African country's GDP is expected to grow by 5% this year
Kenya's economy is expected to grow at a faster pace this year, underpinned by a recovery in the country's key agriculture sector, the World Bank reported on Wednesday.
According to the forecast, the East African country's GDP will expand by 5% in 2023, inching up from 4.8% last year, as favorable weather conditions are expected to increase agricultural yields and boost hydro-power generation.
After two years of drought, the country's farming areas have enjoyed heavy rainfall in recent months, which could boost agricultural output and reduce inflation, the World Bank said in its Kenya Economic Update.
However, the report noted that commodity price volatility has added inflationary pressure, and that tighter global financing conditions have weighed on the country's exchange rate and foreign exchange reserves.
The growth rate in East Africa's second-largest economy is projected to accelerate to 5.2% next year and 5.3% in 2025, pushed by a decline in global commodity prices and substantial private investment, the report said.
"The strong GDP growth in the medium term is projected to benefit from reduced crowding out by the government because of fiscal consolidation and will be driven by robust private investment," said Naomi Mathenge, World Bank Kenya senior economist.
Economic expansion was also driven by the service sector, which contributed about 80% to GDP. The financial services, tourism, and transport sectors have performed "especially strongly" as the country continues to recover from the pandemic.
At the same time, the World Bank warned that Kenya's growth outlook faces a number of risks, including new potential global shocks.
"External risks include weaker than anticipated growth in Europe, elevated global commodity prices that can increase Kenya's import bill and increase the cost of reducing inflation, and further tightening of financial conditions in advanced economies," the report concluded.
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