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World Bank forecasts slow growth

Monday December 11 2017
By JAMES ANYANZWA

East African states can expect a slowdown in economic activity, with the World Bank forecasting Kenya’s economic growth at 4.9 per cent this year, compared with 5.8 per cent in 2016.

Tanzania’s growth is expected to decline to 6.5 per cent, from 7 per cent in 2016.

Uganda, Rwanda, Burundi, Somalia and South Sudan are also expected to face a contraction in economic activity.

The World Bank cited drought, weakening private sector investment, declining credit to productive sectors, insecurity and political tensions as key risks to growth.

The Bretton Woods institution says Kenya’s move to introduce interest rate caps will not solve the problem of reduced credit to the private sector unless the government addresses the issue of public debt and persistent budget deficits.

The interest rate caps, it says, have only worked to undermine the Central Bank’s independence and ability to implement its monetary policy, with adverse effects on the growth of the economy.

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But it acknowledges that the decline in credit started before the implementation of the rate caps.

“In this regard, there is a need to carry out a deeper set of macro and microeconomic reforms to improve credit access and financial inclusion,” the Bank says.

“Reforms that strengthen consumer protection and increase financial literacy are essential to address predatory lending,” it adds.

Private sector credit growth fell from about 25 per cent in mid-2014 to 1.6 per cent in August 2017— its lowest level in over a decade

READ: Kenya cuts 2017 economic growth forecast to 5.5pc

ALSO READ: Kenya growth outlook falls on poll uncertainty

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