Kenya Forecasts Economy to Expand, Inflation Stay Contained

Kenya’s economic growth will accelerate this year and inflation will remain near the 5 percent mid-point target as the central bank pursues a “prudent” monetary policy, according to the Finance Ministry.

The economy is forecast to expand 6.9 percent in 2015, after slowing last year to an estimated 5.3 percent, the ministry said in a budget policy statement on its website on Wednesday. Falling oil and food prices will help keep inflation contained, according to the document. Expansion will be underpinned by growth across a wide range of industries, including agriculture, manufacturing and construction.

Kenya’s tourism industry contracted every quarter through September since the start of 2013 amid a series of deadly gun and bomb attacks blamed on Somalia-based al-Qaeda-linked militants, sparking travel warnings by the U.S. and U.K.

The government is responding to the threats by boosting security personnel, securing its border with neighboring Somalia and reducing street crime, the Finance Ministry said.

Inflation eased to 6.02 percent in December from 6.09 percent in November, partly driven by lower oil prices in the fuel-importing nation. The central bank’s benchmark interest rate has been at 8.5 percent since May 2013.

The government has negotiated a “precautionary arrangement” with the International Monetary Fund, amounting to $488 million of concessional and non-concessional loans, to help cushion the economy against shocks, according to the budget policy statement. The package is awaiting final approval by the IMF’s board of directors.

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