September 4, 2010 / 12:08 PM / 9 years ago

UPDATE 1-Kenya to grow 5.2 pct in 2010 - govt advisory body

* Says govt has to re-examine growth targets in Vision 2030

* New constitution seen as a boost to economy

* Advisers concerned at gap between lending, deposit rates

(Adds details)

NAIROBI, Sept 4 (Reuters) - Kenya’s economy will grow by 5.2 percent in 2010, a government advisory body said on Saturday, a forecast that exceeds the government’s previous estimate.

“The economy registered positive growth of 2.6 percent in 2009 and is on a course to recovery with a projected growth of 5.2 percent in 2010,” Amos Kimunya, transport minister, told a news conference after a meeting of the National Economic and Social Council.

The government had forecast growth of 4.5 percent for 2010.

East Africa’s largest economy took a hit from a bloody post-election crisis in 2008 which cut growth to 1.6 percent, down from a peak of 7 percent in 2007.

A power-sharing deal brokered by former U.N. Secretary General Kofi Annan stopped the fighting and created Kenya’s first coalition government with Raila Odinga as prime minister.

Thereafter drought and the global financial crisis hurt its recovery, with growth coming in at 2.6 percent last year.

Kenya’s Vision 2030, a long term development plan, has a medium-term aim to achieve growth rates of 7-10 percent and to transform the country into a middle income economy.

The council said the government’s target of having a growth rate of 10 percent by 2012 would have to be re-examined.

“Given the fact that the Kenyan economy has been growing at a pace much lower than envisaged under Vision 2030 ... the Vision must be revised to reflect the reality on the ground,” Kimunya said.

The council said it welcomed the government’s increased investment in electricity generation, meant to match ever-increasing demand, but said it was concerned at the large spread between banks’ lending and deposit rates.

“The council noted and expressed concerns on the large margin between the interest charged by banks and that paid to savers and recommended the appropriate measures to be taken to address this anomaly,” Kimunya said, reading a statement on behalf of the President Mwai Kibaki and Odinga.

Some analysts say that a traditionally conservative banking sector has been reluctant to cut its rates in light of a long history of high credit risk in Kenya.

In late July, the central bank’s Monetary Policy Committee cut its benchmark Central Bank Rate to 6 percent from 6.75, saying it wanted to send a strong message to commercial banks to lower their stubbornly high lending rates. [ID:nLDE66R1YR]

Kibaki signed a new constitution in August after Kenyans endorsed it earlier in the month. The new law is meant to curb the president’s power and increase civil liberties.

“The council noted the endorsement and subsequent promulgation of the document has given fresh impetus for economic growth and national development,” Kimunya said. (Reporting by George Obulutsa, Editing by Mike Peacock)

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