NAIROBI: Volatility on Kenya’s domestic foreign-exchange market and the monetary policy response to calm those fears will damage the country’s economic output, the World Bank said as it lowered the growth forecast for East Africa’s biggest economy.
The economy is expected to expand 5.4 percent this year, compared with an estimate of 6 percent in December, the Washington-based lender said in a report published on Thursday. It also cut its projection for 2016 by a similar margin to 5.7 percent.
“The revisions reflect the reassessment of risks associated with macroeconomic instability resulting from exchange-rate volatility, inflationary threats associated with concerns about currency depreciation and delayed fiscal consolidation, balance of payment pressures, and the poor transmission of the effects of low oil prices,” it said in a report titled “Storms Clouds Gathering.”
Kenya’s shilling has weakened 12 percent against the dollar this year, in tandem with a rout of other emerging-market currencies. The economy has struggled after a spate of Islamist-militant attacks that frightened off tourists, the second-biggest source of foreign currency revenue after farm exports. Visitor arrivals dropped 18 percent in the eight months through August, according to Kenya National Bureau of Statistics data.
