NAIROBI - The African Development Bank (AfDB) has cut the expected economic growth rate for Kenya in 2011 to 3.5-4.5% from an earlier forecast of 4.5-5% due to high inflation and a volatile exchange rate, the bankâ€™s country economist for Kenya said on Friday.
The shilling has fallen through several record lows against the dollar this year and the AfDB expects it to continue sliding towards the 110 level per dollar, compounding the problem of rampant inflation, which the bank projects will head to 20 percent in October, or December, from 16.67 percent in August.
â€œWhen you have those fundamentals behaving the way they are, then definitely you get a hit on GDP growth,â€ Walter Odero said. â€œThe projection which we had at the beginning of the year was to have a growth of 4.5-5%, that has since been revised to 3.5-4.5% for 2011.â€He said the Central Bank had failed to respond quickly to the volatility in the exchange rate, adding that policymakers have to raise the Central Bank rate aggressively.
AFDB cuts Kenyaâ€™s growth to only 4.5%