The World Bank characterized the economy’s situation with the drought that affected the economy’s driver, agriculture, the electioneering period and the declining credit in the private sector.
In its economic update on Kenya, the World Bank attributes the downward revision to drought that affected agricultural output and hydro power generation, a prolonged electioneering period and a slowdown of credit to the private sector.
The slump in economic activity in 2017 has however been mitigated by a resurgent of the tourism sector, strong public investment and relatively low oil prices. The bank maintains that while removal of interest rate cap will spur the flow of credit to the private sector, more will need to be done to bolster small and medium-size businesses.
The bank projects that the economy will grow at 5.5 percent in 2018 and 5.9 percent in 2019 if supporting policies are implemented and macroeconomic stability.
Some of the structural and sectoral reforms needed to propel the economy include rationalizing public wages and salaries, strengthening revenue mobilization and improving efficiency in public investments. The easing of the headwinds that have characterized 2017 should lead to a rebound in the mid-term