Kenya 2012 C/A defcit may hit 15 pct of GDP: World Bank

Kenya’s economy will grow by 5 percent this year and next but additional external shocks would place east Africa’s biggest economy under severe stress, the World Bank said on Monday.

With Kenya gearing up for its first nationwide elections early next year since a disputed poll in late 2007 triggered widespread violence, the bank warned that Kenya’s economy was “out of balance”.

“In the absence of economic and social turbulence, Kenya should grow at 5 percent in 2012 and 2013, which would still be substantially below its neighbors,” the bank said in a report.

Kenya’s external position is vulnerable to shocks as the current account deficit has soared, the World Bank said, forecasting the deficit could reach 15 percent of gross domestic product this year.

“This is among the worst external balances in the world and poses a significant risk to Kenya’s economic stability,” it said. “An additional external shock, especially a sharp rise in oil prices, would trigger severe economic stress, especially if accompanied by capital outflows.”

The Washington-based body projected Kenyan inflation would remain below 10 percent in the second half of 2012.

A fall in food prices helped slow Kenya’s inflation rate to 12.2 percent in May after it peaked at nearly 20 percent late last year.

Reuters.