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Poverty

Economic growth in Kenya

Future economic growth in Kenya is contingent on avoiding economic shocks, according to the 2012 Kenya Economic Update Report released by the World Bank. The government’s policy actions to increase interest rates and curb expenditures at the end of 2011 resulted in the stabilising of Kenya’s economy, but the country’s economy is still vulnerable, with the current account deficit having reached record proportions.

At present the World Bank is continuing to predict an economic growth rate for Kenya of 5% in 2012 and 2013, but the country is vulnerable to economic shocks such as oil price rises, which could result in a significantly lower growth figure. Kenya started the year 2012 with an inflation rate of around 20%, but the rate has now fallen below 10%, and this may allow interest rates to fall, thereby encouraging economic activity.

The food and energy sectors are both critical to the country’s economic prospects. The prices which Kenyans have had to pay over the past year for their staple food, maize, have been around twice the international market price, while sugar has been costing around three times the international price. Electricity supplies are not as reliable as they need to be, and large imports of oil are mainly responsible for Kenya’s current account deficit.