A man withdraws cash from a Barclays bank automatic teller machine outside Barclays Plaza in Nairobi.NOOR KHAMIS
Kenya's economy will expand between 4.5 to 5.0 per cent this year, thanks to good rainfall and a recovery in the local currency in recent weeks, before accelerating to 5.0 per cent or higher in 2012, the planning minister said on Monday.
The east African nation has faced a tough 2011 after drought hurt its key agriculture sector earlier this year, fuelling rapid inflation and a collapse in the value of the shilling which the central bank has struggled to control. Europe's debt woes and north Africa's political turmoil also hurt Kenya's exports to both regions.
Some economic analysts said Planning Minister Wycliffe Oparanya's improved forecasts -- up from an earlier 4.0 per cent growth for 2011 -- looked more realistic than Finance Minister Uhuru Kenyatta's predictions of 5.3 per cent in 2011 and 6.1 per cent in 2012. Late last year, the government had targeted a 2011 growth rate of 6.5 per cent.
"I see growth at roughly 4.5 to 5.0 percent," Mr. Oparanya told Reuters in an interview, matching a World Bank forecast.
"Rising food prices and high oil prices have affected our growth this year. But we are very hopeful that with a lot of rain our economy is going to recover. We see an even better growth of not less than 5 percent in 2012."
Heavier than-expected rainfall across much of the country in the final quarter of 2011 should help curb food inflation next year, the minister said.
Prices in food and non-alcoholic drinks, which carry a 36.04 per cent weighting in the consumer price index, rose by 26.20 per cent year-on-year in November, the same as in October.
The overall year-on-year rate of inflation rose for the 13th straight month to 19.72 percent in November, mainly fueled by high global oil prices and a weak shilling that lost as much as 25 percent against the dollar this year.
Kenya's central bank has now tightened the monetary screws, hiking its key lending rate by 11 percentage points in the fourth quarter of 2011 to its current level of 18 per cent to combat inflation and exchange rate volatility. The shilling has rallied strongly since.
"I think the Finance Minister has been slow on the draw," said Aly Khan Satchu, an independent Nairobi-based analyst, referring to Mr. Kenyatta's forecast.
Mr. Kenyatta, one of six high profile Kenyans suspected of masterminding Kenya's post-election violence in late 2007, early 2008, and facing an International Criminal Court investigation, gave his latest forecasts in his June budget reading.
Mr. Oparanya said the country was likely to see reduced foreign investment in 2012 ahead of crucial presidential and parliamentary elections, but was hopeful that the euro zone woes would be resolved by the end of the first quarter.
"Next year is an election year and many investors shy away from investing here. I'm hopeful that the euro will stabilize because they are coming up with austerity measures," Mr. Oparanya said.
Mr. Oparanya said that with Uganda poised on the cusp of an oil boom and Kenya also hopeful of striking oil, local fuel prices would become more stable in the future and help keep imported inflation in check.
"Uganda has invited Kenya to invest in their oil refinery facility and if we are in there we have a say also on oil prices that we'll get, ensuring stability of fuel prices in this country," Mr. Oparanya said.