The World Bank said the expansion of the economy will be driven by broad-based increases in services and industry despite the poor performance of the agricultural sector.
"Kenya's growth prospects remain bright; however, emerging shocks are challenging the broad-based rebound," the lender said in its latest edition of the Kenya Economic Update (KEU).
The report, which is produced twice a year assesses recent economic and social developments and prospects in Kenya and places them in a longer-term and global context.
It notes that there has been a marked sequential slowdown in economic growth since the third quarter of 2021 as the base effect dissipated and business confidence weakened because of the global commodity market shock, a long regional drought, and domestic political uncertainty in the run-up to the August general elections.
"Business confidence however picked up in the wake of a smooth transition of power following a largely peaceful presidential election," the World Bank said.
The report indicates that the ongoing drought and the cost-of-living increases have affected households throughout the country.
It says the agriculture sector which contributes almost 20 percent of the country's Gross Domestic Product (GDP) contracted by 1.5 percent during the first half of this year.
The report says that the long drought in arid and semi-arid areas, rising inflation, and tighter global financial conditions continue to create challenges for Kenya to sustain its recovery.
"Kenya can further leverage the agriculture sector to spur growth, poverty reduction, and food security," Keith Hansen, World Bank Country Director for Kenya, said during the launch.
Hansen noted that boosting food resilience through community interventions in arid and semi-arid lands while supporting farmer groups to link into sustainable value chains will help to better feed Kenya during periods of drought.
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