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Kenya Economic Update : Unbundling the Slack in Private Sector Investment – Transforming Agriculture Sector Productivity and Linkages to Poverty Reduction (English)

The Kenyan economy rebounded in 2018 and economic activity in the first quarter of 2019 was healthy, although emerging drought conditions could curtail GDP growth for the remainder of the year. The economy expanded by 6.0 percent in the first three quarters of 2018 compared to 4.7 percent during the same period in 2017 driven by strong private consumption in part due to improved income from agricultural harvests in 2018, remittance inflows, and lower food prices. The Bank's GDP growth estimate for 2018 is about 5.8 percent. A strong pick-up in economic activity in Q1 of 2019 was reflected by real growth in consumer spending and stronger investor sentiment. Nonetheless, a delayed start to the March-May 2019 "long" rainy season could affect the planting season-resulting in poor harvests. In addition, ongoing emergency intervention to address food shortages in several counties could impose fiscal pressure constraining capital spending. These developments have slowed the growth forecast for 2019 and for the medium term relative to our October 2018 Update. Inflation remains within the government's target range of 5±2.5 percent. Headline inflation averaged 4.7 percent in 2018 compared to 8.0 percent in 2017, primarily due to the slowdown in food inflation, which in turn offset a temporary acceleration in energy prices. Further, core inflation has remained below 5 percent, suggesting benign underlying demand pressures. With low inflation, monetary policy could be more accommodative to support growth if needed, but with interest rate caps tied to the policy rate, further loosening would be constrained. The low inflationary pressure has also been supported by a stable local currency. The shilling has traded within a narrow band of Ksh100/US Dollas-Ksh.103/US Dollars in 2018, thereby serving as a nominal anchor to inflationary expectations

Details

  • Author

    Wankuru,Peter Chacha, Dennis,Allen Curtis K., Angelique,Umutesi, Chege,Patrick Nderitu, Mutie,Celina Katunda, Sanya,Sarah Oludamilola, Chengula,Ladisy Komba, Njagi, Tim, Pape,Utz Johann, Haynes,Alastair Peter Francis

  • Document Date

    2019/04/01

  • Document Type

    Working Paper (Numbered Series)

  • Report Number

    135870

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Kenya,

  • Region

    Africa,

  • Disclosure Date

    2019/04/08

  • Disclosure Status

    Disclosed

  • Doc Name

    Kenya Economic Update : Unbundling the Slack in Private Sector Investment – Transforming Agriculture Sector Productivity and Linkages to Poverty Reduction

  • Keywords

    real effective exchange rate; issuance of government security; management of government debt; water subsector; sources of tax revenue; interest rate cap; current account deficit; private sector activity; global growth prospects; global economic prospect; farm gate price; poor rural household; knowledge delivery system; private sector credit; Irrigation and Agriculture; poverty by province; tax revenue collection; value added tax; business to business; commercial bank lending; wages and salary; rural poverty decline; source of employment; medium term growth; large scale farmer; implementation of reform; prudent fiscal policy; Payments to Firms; increasing tax revenue; grain growing counties; domestic revenue mobilization; food supply chain; gross domestic product; private sector participant; agricultural sector productivity; warehouse receipt system; forms of insurance; fiscal consolidation effort; financial service sector; machinery and equipment; source of energy; ongoing public sector; reduction of poverty; primarily due; global economic growth; rural poor household; livestock insurance; private consumption; agricultural output; agricultural productivity; monetary policy; government spending; fiscal deficit; pending bill; remittance inflow; credit growth; fertilizer subsidies; fiscal balance; income source; food price; industrial activity; household consumption; rainy season; nutritional security; fiscal adjustment; agricultural income; aggregate demand; excise duty; extension service; drought conditions; agricultural production; inclusive growth; net export; target range; public debt; financial market; emergency intervention; oil price; industrial production; real growth; consumer spend; business cycle; Water Management; credit flow; agricultural value; fiscal pressure; capital spending; private investment; macroeconomic environment; agriculture sector; weather condition; commodities exchange; import duty; fiscal management; inflationary expectation; nominal anchor; corporate loan; foreign reserve; medium-term outlook; agricultural household; external environment; regional market; global trade; real output; input use; agricultural harvests; narrow band; inflationary pressure; rental price; inflation average; energy price; market integration; land scarcity; productivity increase; statistical table; Capital Inflows; program leader; urban household; subsistence farmer; commercial agriculture; short-term shocks; traditional banking; agricultural commodity; agricultural finance; climate proofing; productivity shock; related shock; arable land; food expenditure; land area; agricultural land; public finance; payment delays; administrative cost; Macroeconomic Policy; irrigation scheme; governance framework; Tax Exemption; cabinet approval; transfer pricing; stamp duty; fertilizer usage; funding requirements; forecast revenue; tax base; tax net; debt instrument; electronic platform; financial protection; short maturity; market confidence; communication strategy; foreign debt; settlement period; crowding out; rural area; Macroeconomic Stability; binding constraint; farm size; policy option; maize marketing; political elite; public official; policy suggestions; output market; capital outflow; targeting mechanism; pricing mechanism; macro policy; macro policies; consumer protection; predatory lending; green revolution; foreign investor; food import; yield curve; domestic borrowing; government bond; budget deficit; ammonium phosphate; expenditure cut; net lending; discretionary budget; government's commitment; fiscal space; staple food; Maturity Interest; import growth; merchandise export; formal economy; export revenue; average contribution; noncommercial purposes; soft drink; business environment; manufacturing sector; Real estate; primary balance; cultivated land; lending condition; fiscal prudence; banking sector; default rate; additional revenue; firm survey; Retail Sector; enterprise survey; trade indicators; Exchange Rates

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Citation

Wankuru,Peter Chacha Dennis,Allen Curtis K. Angelique,Umutesi Chege,Patrick Nderitu Mutie,Celina Katunda Sanya,Sarah Oludamilola Chengula,Ladisy Komba Njagi, Tim Pape,Utz Johann Haynes,Alastair Peter Francis

Kenya Economic Update : Unbundling the Slack in Private Sector Investment – Transforming Agriculture Sector Productivity and Linkages to Poverty Reduction (English). Kenya economic update,no. 19 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/820861554470832579/Kenya-Economic-Update-Unbundling-the-Slack-in-Private-Sector-Investment-Transforming-Agriculture-Sector-Productivity-and-Linkages-to-Poverty-Reduction