Kenya’s overall economic performance has remained robust over the past eight years, and it is expected to continue into the medium term at a rate of 6% 2017, according to the latest economic update for the country.

The Kenya Economic Update (KEU): Beyond Resilience – Increasing Public Investment Efficiency, says the country’s positive forecast is driven by a vibrant services sector, enhanced construction, currency stability and low inflation, low fuel prices, a surge in remittances and a growing middle class characterized by rising incomes.

“I am happy to see Kenya’s economy demonstrate resilience in the face of regional and global economic slow-down,” said Diarietou Gaye, World Bank Country Director for Kenya.

“We are happy that Kenya remains one of the bright spots in Sub-Saharan Africa with its economic growth approaching 6 percent and outpacing the 2016 regional average of 1.7 percent,” he said. “Kenya’s growth has outperformed the average for the Africa region for over eight consecutive years. The prevailing macroeconomic stability means that Kenyans can now enjoy more stable prices for essentials like food, fuel, housing and transportation.”

Kenya’s overall economic performance has remained robust over the past eight years and this is expected to continue into the medium term with projected economic growth above 6 percent in 2017 and 2018. The key drivers for this growth include; a vibrant services sector, enhanced construction, currency stability, low inflation, low fuel prices, a growing middle-class and rising incomes, a surge in remittances, and increased public investment in energy and transportation.

This positive trend was reinforced by the latest World Bank Group’s Ease of Doing Business report which pegged Kenya as a top global improver for 2 consecutive years. Kenya moved up to the 92nd spot compared to 113 in the previous year and is now among the top 5 economies in Sub-Saharan Africa where it is easiest to do business. This improvement in the country’s business climate is largely due to the implementation of reforms to ease the process of doing business.

The report argues that nonetheless, the economy remains vulnerable to both external and domestic risks ranging from adverse weather that could curtail agricultural growth, uncertainties around the 2017 elections that could unduly dampen investor confidence, to weaker than expected global demand which could subdue the country’s exports.

“To sustain Kenya’s growth momentum over the medium term, it will be important to manage risks that may arise such as a subdued global economy, volatility in global financial markets, and domestic shocks such as adverse weather conditions,” noted Jane Kiringai, Senior Economist and Lead Author of the KEU. “Rebuilding fiscal buffers will provide the necessary policy space to mitigate such potential shocks.”

While Kenya is set for further medium-term growth, the special focus of the 14th edition of the KEU recommends reforming the systemic weaknesses of the country’s Public Investment Management (PIM) system, to see stronger growth. PIM is currently characterized by low execution and cost escalation of infrastructure projects.

“There is potential for Kenya to enhance growth prospects beyond the prevailing levels by increasing the productivity of public investments,” said Jens Kromann Kristensen, Lead Public Sector Specialist and co-author of the report. “Public investment in a range of infrastructure projects is generating strong returns, but the weak execution of some others holds back what could be an even greater catalytic impact of public investment on economic growth.”

“There is also urgent need to streamline the process of land acquisition, compensation and resettlement which lead to significant delays and cost escalation in the design and execution of public infrastructure projects,” said Sheila Kamunyori, World Bank urban specialist one of the co-authors of the report.

In addition to complex, long-term PIM reform recommendations, the report recommends several quick, high-priority actions that can help achieve higher levels of growth, such as:

• Establishing a minimum criteria for project preparation, appraisal and inclusion of a project in the budget

• Gradually strengthening the National Treasury role to include providing an independent review of project proposals, and enhancing capacity to undertake this role

• Improving transparency and accountability for management of the portfolio of public investment projects

Quick win recommendations related to land acquisition include:

• Providing payment assurance for financing land acquisition and resettlement to ensure immediate availability of funds for compensation when needed

• Evaluating the current proposal to amend the legislation on compensation in land acquisition against international good practice to balance fairness, timeliness and the public interest

• Developing a policy on involuntary resettlement with supporting legislation which reflects the principles of international good practice

The KEU was prepared by the World Bank Group in consultation with the Kenya Economic Roundtable.