IMF: credit to Kenyan manufacturers picking up, to support growth

NAIROBI (Reuters) – The International Monetary Fund (IMF) said on Wednesday lending to Kenya's manufacturing sector was picking up, supporting expectations of robust economic growth.

Economic expansion in the East African nation slowed to 4.1 percent in the first quarter of this year from 5.2 percent a year earlier. A spate of gun and bomb attacks have scared away tourists, while low rainfall curbed farm output.

But the IMF told a news conference the increase in lending to manufacturers, renewed foreign investor interest, mainly in the extractive industries, and stable macroeconomic policies would support overall growth.

"These are also supporting signals that are positive for increased growth, certainly if not immediately, then over time," Mauro Mecagni, who led an IMF appraisal mission to Nairobi, said at the end of the visit.

The IMF expects Kenya's economy to grow by 5.5-6 percent this year and Mecagni said data from one quarter alone was not enough to warrant an immediate review of the projection.

The government expects the economy to grow by 5.8 percent this year while the World Bank forecasts 4.7 percent.

Kenya's debut Eurobond, which was oversubscribed by five times last month, reinforced the sense of confidence, Mecagni added. The IMF also expects 47 new counties, created last year to decentralise government, to help economic growth by channelling development funds more effectively, the IMF said.

The counties have struggled to use their budgets effectively in the fiscal year ended June.