Kenya withstood another difficult yearin 2012 as policy tightening and weaker global demand slowedeconomic activity. With decisive fiscal and monetarypolicies, the government managed to restore confidence inKenya's medium term prospects. Kenya's growth rateis still below its potential and its peers, externalimbalances remain which threaten its future growth, and thepace of economic growth is not generating enough modernsector wage jobs. With the passage of the new constitutionin 2010 and its implementation, stronger institutions areemerging, putting Kenya on a sound footing ready to takeoff. In the very short term, what remains to be done is forKenya to deliver a credible and peaceful election in March2013, and thereafter a smooth transfer of power. In themedium term, Kenya will need to start building a strongerfoundation for growth, and undertake structural reforms tocorrect the external imbalances. To generate more jobs forthe burgeoning educated youth population, Kenya will alsoneed to reduce the transaction cost for firms, by reducingjob-smothering corruption and the cost of doing business(particularly in transport and energy).
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