IMF trims Kenya's 2015 economic growth forecast to 6.5 %

by Reuters 0

The International Monetary Fund said on Thursday Kenya’s economy was seen expanding by around 6.5 per cent this year, rather than its earlier forecast of 6.9 per cent.

East Africa’s biggest economy has struggled with a number of challenges in the past year, including attacks blamed on Somalia’s al Shabaab militants that have scared away tourists, and periodic droughts that have reduced farm output.

(READ MORE: World Bank raises Kenya’s 2015 growth forecast)

Kenya’s economy grew by 5.3 per cent in 2014 from 5.7 per cent a year earlier, hurt by a slowdown in tourism and farm output.

“Kenya’s economy remains resilient in the face of headwinds, with real GDP projected to grow by around 6-1/2 per cent in 2015, supported by rising infrastructure investments, lower energy prices, and a dynamic private investment environment,” Mauro Mecagni, head of an IMF team visiting Kenya said in a statement.

Mecagni did not say why the IMF trimmed its forecast.

Kenya’s fiscal deficits were seen rising above targets in both the 2014/15 (July-June) and 2015/16 fiscal years, he said.

(READ MORE: Kenyan economy strained by terrorist attacks)

The 2014/15 budget had a deficit of 7.4 per cent of GDP, and in 2015/16, the National Treasury’s Budgetary policy statement for February targets a budget deficit of 8.2 per cent of GDP.

“The mission urged the authorities to boost efforts to mobilize domestic revenue and restrain current spending, so as to preserve room for critical priorities, notably closing infrastructure gaps, supporting an orderly devolution process, and strengthening the social safety net,” Mecagni said.