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World Bank downgrades Kenya’s growth to 5 percent

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By Monica MUEMA

Global lender, the World Bank has downgraded East Africa’s largest economy’s 2023 growth outlook to 5 percent amid concerns over increased commodity prices including fuel and the effects of an ongoing drought.

The Bank had earlier projected Kenya’s growth at 5.5 percent but the prospects have been dampened by high inflation rates and food insecurity that has hit the Horn of Africa.

Adverse weather conditions have exacerbated inflationary pressures caused by supply chain disruptions and the war in Ukraine.

“Kenya is set to grow at 5 percent in 2023 –down from 5.5— and back up to 5.3 percent in 2024,” the World Bank said in the Kenya Economic Update.

The prices of key food items like maize flour, milk and wheat products have jumped considerably in the last few months, straining the majority of households that are still reeling from the economic hardships left by the Covid-19 plague.

Consumer inflation quickened for the fourth consecutive month, hitting a high of 8.5 per cent in August, up from 8.3 per cent in July with the Kenya National Bureau of Statistics (KNBS) noting that such a rise was the highest seen in as many years with September’s 9.3 percent labelled as a ‘worrying concern’.

As a result, the majority of Kenyan households are now pressed to the wall, with the present tough conditions unlikely to let up in the near future.

Figures by FocusEconomics Consensus Forecast panelists expect inflation to average 7.7 percent in 2022, which is up 0.6 percentage points from last month’s forecast. For 2023, the panel sees inflation averaging 7.1 percent.

For instance, the effect of high taxation and rising inflation has seen a lackluster supply of homes and consumer confidence in the housing market has been falling as a result, but that could change according to various sentiments from market players. Despite pandemic-related mortgage bailouts seen to be expiring.

The cost of steel prices, for instance, has subsequently affected the country’s construction industry, which heavily relies on steel for such functions as installation of reinforcing bars, manufacturing of heating and cooling equipment as well as internal fixtures and fittings.

As a result of the rising costs, local manufacturers of steel products have increased prices of goods ranging from construction bars to galvanized sheets and steel tanks to reflect soaring metal prices in the global market.

 

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