UPDATE 1-World Bank cuts Kenya growth forecast for 2014

Thu Jun 26, 2014 2:07am EDT

(Adds inflation risks, background)

NAIROBI, June 26 (Reuters) - Kenya will grow slower than expected in 2014, the World Bank said on Thursday, citing poor rains and growing insecurity in east Africa's biggest economy.

The World Bank said Kenya's economy would expand 4.7 percent this year, shaving 0.5 percentage points off its previous estimate six months ago. The bank projects growth to remain the same in 2015.

The cuts suggest growth in Kenya will lag its east African neighbours. The government earlier this month put Kenya's growth at 5.8 percent this year and 6.4 percent in 2015.

"The new projections reflect the effects of the drought, the deteriorating security situation, low level of budget execution, and tight global credit as the U.S. Federal Reserve winds down its expansive monetary policy," the bank said in its June Economic Update for Kenya.

The bank also said inflationary pressures were building and warned that inadequate rainfall seen this year could create macroeconomic instability in 2014.

"Higher food and electricity prices are expected to raise inflation above its target level, putting macroeconomic stability, private investment, and projected growth at risk," the bank added. (Reporting by Drazen Jorgic; Editing by George Obulutsa and Clarence Fernandez)

FILED UNDER: