Kenya's economy set to grow by 6 percent
January 18 2007 at 04:38PM
By David Mageria
Nairobi - Kenya's economic growth is expected to have risen slightly to six percent in 2006, and the growth momentum should be maintained this year, the Central Bank of Kenya (CBK) said on Thursday.
"Leading economic indicators for the first ten months of 2006 show that the economy is still robust and is projected to grow at 6 percent in 2006 compared with 5,8 percent in 2005," the central bank said in its latest monthly economic review.
The bank attributed the performance to macroeconomic stability and improved investor confidence. The government has said it expects economic growth to surpass six percent in 2006.
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"Improved performance in key sectors in 2006 particularly tourism, telecommunications, energy, construction and manufacturing is expected to continue in 2007 and in the medium term," the bank said.
But analysts are mixed on their forecast for 2007, with some predicting a slackening in economic activity due to political uncertainty ahead of a presidential election later in the year.
Others downplayed the impact of the polls.
"We have strong indications that growth can be maintained at six percent despite increased political activity," said Rick Ashley, the CEO of Old Mutual Asset Managers.
The Kenyan economy has been on an upward trend since President Mwai Kibaki took office in late 2002 when growth was at 0,6 percent, thanks to economic reforms, low interest rates and stronger investor confidence.
But experts say the economy, east Africa's biggest, could have done better if the government made more effort to fight corruption and crime, invested robustly in fixing poor roads, and improved access to water, electricity and telecoms.
The central bank said it expects interest rates to remain stable in the short to medium term but added that private sector lending by banks had slowed in the year to November, increasing by 13 percent compared with 15,6 percent a year earlier.
Interest rates have ticked higher to around six to eight percent in recent months compared with about 1 percent when Kibaki's government came to power, promising to cut government borrowing.
The central bank has left its Central Bank rate (CBR) at 10 percent since August, signalling its continued monetary tightening stance. The bank hopes local commercial banks are going to use the rate as a benchmark to set their lending rates.
CBK said official foreign exchange reserves rose to $2,4-billion by end of November compared with $1,7-billion a year earlier.
The bank added that it purchased $671-million from the domestic foreign exchange market in the year to November.
