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Kenya economic update : storm clouds gathering – the economy facing strong headwinds with a special focus on public participation (Inglês)

Kenya’s economic performance remains solid, underpinned by strong infrastructure spending and consumer demand, which are driving growth. On the production side, growth from services, electricity generation, and a rebound in agriculture will drive growth in 2015. The World Bank estimates that growth will be 5.4 percent in 2015, a 0.6 percent downward revision of its estimate in December 2014. The revision reflects the strong headwinds the economy is facing in the foreign exchange market, the monetary policy response to calm those fears, and the fact that the effect of lower global oil prices on the wider economy was muted because of the depreciation of the shilling in 2015 and weak transmission into the wider economy. The revised figure is still higher than the average for both lower-middle-income countries and Sub-Saharan Africa. The risks to growth remain the same as in previous updates except for Chinese devaluation which has heightened global risks. The external sector remains vulnerable to further shocks from weak global export demand exacerbated by weak doing business environment, the continued strengthening of the United States (U.S.) dollar, and the authorities’ response to those external risks. Preliminary analysis shows that the direct transmission from events in China to Kenya are minimal as the renminbi closely tracks the U.S. dollar. While the fiscal deficit of 8.7 percent of gross domestic product (GDP) has raised concerns at the national level, it is the quality and transparency of spending that is paramount in the devolved system of government. Functional and political devolution to counties also seems beneficial for efficiency, as it provides incentives for county governments to deliver locally preferred services more efficiently, as the burden and benefits of public service delivery accrue in communities. Even though the benefits of devolution have not all been achieved and counties still going through a steep learning curve, a majority of Kenyans still support the devolved system of government despite the challenges being experienced in its implementation. Increasing public participation in budget information can help county governments become more efficient and targeted in the spending and reflect the voices of the people in their spending decisions.




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