From Business Day Live

The World Bank cut its growth forecast for Kenya for 2013 and 2014 to about 5%, citing low levels of government spending and high interest rates charged by commercial banks.

The cuts suggest growth rates in east Africa’s biggest economy will lag those of its neighbours.

Gross domestic product (GDP) will rise 5% this year and an estimated 5.1% next year, said the bank, undercutting the government’s forecasts.

In June the bank had predicted the $37bn economy would grow 5.7% in 2013 and 6% in 2014.

“The growth momentum generated … was lost in the second and third quarters of 2013, held down by lack of government spending and inadequate transmission of the monetary policy stance to the real economy,” the World Bank said.

The Kenyan shilling weakened slightly, quoted at 86.70/86.90 at 8.30am GMT compared with Monday’s close of 86.50/86.60. But traders said this was due to corporate demand for dollars rather than the World Bank data.

The slower pace of growth reflected a weakening investment climate and what the World Bank called an unsupportive fiscal environment, referring to funding demands placed on Treasury by a new devolved system of government.

Written by George Obulutsa | Read more at Business Day Live