Kenya set for faster growth, says World Bank

NAIROBI–Low oil prices and loose monetary policy in the U.S. have bolstered Kenya’s economy, East Africa’s largest, helping it grow faster than expected last year and setting it on course for sustained growth in the years ahead, the World Bank said in a report Thursday.

The risk for sub-Saharan Africa’s fifth-largest economy is that international economic conditions won’t necessarily remain so favorable, given weak demand for goods in the eurozone, still grappling with slack growth, and the expected tightening of the U.S. Federal Reserve’s monetary policy later this year, the bank said.

Despite suffering a decline in tourist arrivals following Islamist militant attacks by Somalia-based group al-Shabaab, including a massacre at a Nairobi mall in September 2013, Kenya’s economy grew by 5.4% in 2014, the World Bank said.

The next few years are set to look better yet, with growth rates seen at 6% for 2015, 6.6% for 2016 and 7% for 2017.

Low oil prices, a setbankc for several large African economies that are net exporters of the fuel, such as Nigeria and Angola, are “a boon” for Kenya, a net importer, the Washington, D.C.-based institution said.

Still, the findings of the organization’s in-depth review of one of the locomotives of Africa’s economic ascent underscore the vulnerability of frontier economies with high growth potential to shifts the economies and policies in advanced economies.

“Kenya’s economy has benefited immensely from the stimulus by the U.S. Federal Reserve,” the report said.

“With the ending of the Fed’s monetary stimulus, the flow of cheap capital that has been funding the current account could dry up, as risk-averse foreign investors exit the region, creating volatility in the foreign exchange market and putting pressure on the Central Bank to raise interest rates, which could choke growth,” the bank warned.

Write to Matina Stevis at matina.stevis@wsj.com