In April, 2015 World bank revised its projections on the growth of Kenya’s GDP from previous 4.7% to 6%, as lower oil prices spur consumption and the government proceeds with rail and energy projects.
The East African economy got off to a “strong” start in 2015 for the first time in years, according to an e-mailed copy of the World Bank’s twice-yearly economic update released on Thursday in the capital, Nairobi.
Oil at a baseline price of about $65 per barrel may increase gross domestic product by as much as 1.2 percentage points in the petroleum-importing nation this year, the bank said. The plunge in crude prices may encourage consumer spending, providing a boost to manufacturers, the report said.
“The rise in real income is expected to trigger significant increases in private consumption, the engine of Kenya’s economy,” the Washington-based lender said in the report. “Higher aggregate demand is also likely to incentivize private investment, particularly in the manufacturing sector.”
The economy is growing faster than many of its peers in the region, with expansion pegged at 6.6 percent in 2016 and 7 percent the following year, the bank said. Growth was an estimated 5.4 percent last year, it said.
Kenya attained lower-middle-income status and became the fifth-largest economy in sub-Saharan Africa last year after the country’s statistics agency revised the method for calculating GDP, increasing the size of the economy by a quarter.
China is helping finance and building a $3.6 billion standard-gauge railway from the port of Mombasa, East Africa’s busiest, to Nairobi, in what the government has described as part of the largest infrastructure project in 50 years since the country gained independence. The state targets boosting installed power-generation capacity by 5,000 megawatts by 2017.
Risks to the outlook include the threat of insecurity, which has hurt tourism, a key source of foreign exchange, and pressure on the budget deficit as the government increases spending, the World Bank said.
Kenya’s shilling has weakened 0.6 percent against the dollar this year, after declining 5 percent in 2014. The currency traded little changed at 91.15 per dollar by 3 p.m. in Nairobi.