According to the World Bank

Peter Warutere (+254 20) 3226444
pwarutere@worldbank.org

Nairobi, December 17, 2009—Kenya is still standing and recovering slowly despite experiencing four major shocks in the past two years, says a new World Bank report released today.

The key message of the December 2009 Kenya Economic Update - Still Standing: Kenya’s slow recovery from a quadruple shock, is that Kenya’s economy has weathered four domestic and external crises reasonably well, but continues to perform below its potential.

The report, the first edition of bi-annual economic updates by the Bank’s Kenya Country Office, analyses the impact of the 2008 post election violence, the global food crisis, the global financial turmoil and the recent drought.

“The good news is that Kenya is one of the few countries in the world that will grow faster in 2009 than it did in 2008,” says Johannes Zutt, the World Bank Country Director for Kenya. “But the projected growth rate of 2.5 percent in 2009 is well below Kenya’s potential and does not even match its population growth."

The growth rate in 2009 improved from a low of 1.7 percent in 2008 but is still low compared to the peak of 7.1 percent achieved in 2007. For 2010, the Bank projects a growth rate of 3.5 percent.

“Despite many challenges, the economy remains resilient to the quadruple shocks. The financial position remains strong, the financial sector is robust, the external sector remains in balance and inflation has declined below 10 percent,” says Wolfgang Fengler, the Bank’s Lead Economist for Kenya.

The report tracks important trends and constraints to Kenya’s economic development, underlining the strengths and weaknesses of the growth momentum. It shows that while economic recovery is being driven by construction and services, the agricultural sector, which has been worst hit by the multiple shocks, will continue to contract.

The agricultural sector, which declined by 5 percent in 2008, is expected to contract by a further 2.4 percent in 2009. It continues to face the most difficult policy challenges, says the report, which highlights the fact that maize prices in Kenya are double the international prices and also substantially above the prices in Uganda and Tanzania. The high maize prices benefit less than two percent of maize farmers, who capture half of the gross revenue from maize trade, while the majority of the urban and rural poor continue to pay high prices.

Services, which account for 55 percent of the economy, are expected to grow by 4.5 percent in 2009, says the report. The tourism sector, which declined by a record 36 percent in 2008 is expected to record a 28 percent recovery, while industry will grow by an estimated 3 percent—driven by a construction boom.