UPDATE 1-Kenyan GDP growth seen at 5.8 pct in 2014 - Ministry of Finance

Wed Jan 15, 2014 10:44am EST

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NAIROBI Jan 15 (Reuters) - Kenya's economy is likely to expand 5.8 percent in 2014 after below-target growth of 5.1 percent last year, the Ministry of Finance said on Wednesday.

The economy faces risks such as weak growth in advanced economies that could affect exports and tourism, as well as public spending pressures such as public sector wages and interest rate payments, the ministry said in a statement.

The government's forecast is higher than the World Bank's latest outlook for growth of 5.1 percent this year in Kenya, which would leave East Africa's biggest economy lagging those of its neighbours.

"Growth is expected to pick up gradually across most sectors," the ministry said in a presentation on the economy, projecting 7 percent growth in 2017.

The ministry said in November it expected the economy to grow 5.6 percent in 2013.

The budget deficit in the fiscal year starting in July is likely to be 5.9 percent of gross domestic product, the ministry said, down from 7.9 percent targeted in the current year to the end of June.

Government spending in 2014/2015 is projected at 1.52 trillion shillings ($17.6 billion) - or 32.9 percent of GDP - from a previously forecast 1.47 trillion shillings, the ministry said.

Kenya's government expects revenues next fiscal year of 1.17 trillion shillings, or 25.3 percent of GDP.

The ministry said the central bank will remain focused on reducing annual inflation to 5 percent and keeping it there. The central bank kept its main interest rate on hold on Tuesday citing steady inflation, which eased to 7.15 percent in December from 7.36 percent the month before. ($1 = 86.1500 Kenyan shillings) (Reporting by Richard Lough and Duncan Miriri; Editing by Hugh Lawson)

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