The World Bank projects Kenya’s economy to grow by an average of 5% in the medium term.
It says in the medium term (which refers to 2-10 years), the economic growth outlook remains strong powered by recovery from multiple crises such as the Covid-19 and drought.
“GDP growth over the medium term is expected to remain at around 5 percent, broadly in line with the pre-pandemic trend and Kenya’s estimated potential GDP growth rate,” the World Bank says.
It projects poverty to resume its pre-pandemic downward trend.
“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.
The economy in 2022 faced challenging global financial conditions, fuel, and food price shocks coupled with the jitters about the general election, and drought that affected the economic activity.
“Fiscal consolidation plays a central role in supporting Kenya’s macroeconomic foundations for inclusive and sustained growth,” said Keith Hansen, World Bank Country Director.
The World Bank however says growth over the medium term could be slowed by external risks such as weaker than anticipated growth in Europe, elevated global commodity prices that could drive up increase Kenya’s import bill and tightening of financial conditions in advanced economies.
It says locally, the risks include spending pressures to tame the high cost of living and lower tax collections.