East Africa’s largest economy could also see lower demand for its horticulture exports and tourist visits from advanced economies due to a global slowdown in economic activity, the bank said. in its report Kenya Economic Update.
“On the home front, risks can emanate from fiscal slippages,” the bank said, anticipating increased spending by President William Ruto’s government.
Ruto took office in September on a promise to ease the high cost of living for citizens, which could put pressure on the budget, the bank said.
Higher spending could reduce the amount of credit available to businesses and increase government debt, the report said, with higher borrowing costs likely to exacerbate the situation.
Policymakers have raised the benchmark lending rate three times since May this year to stem inflationary pressures.
Growth is expected to reach 5.3% in 2024, according to the World Bank, thanks to increased private investment.
Kenya’s economy experienced one of its fastest growth rates in 2021, growing 7.5%, as it recovered from its first contraction in nearly three decades the previous year in due to the pandemic.