Kenya's central bank on Friday projected a 5-percent economy grow by June next year, up from 4.6 percent in 2004/05.

Central Bank of Kenya (CBK) Governor Andrew Mullei said the economic recovery is expected to gain momentum, as sectors that performed well in 2004/05 are expected to improve further.

"Exports are expected to continue performing with strong growth in the world economy and increased regional market," Mullei told a news conference in Nairobi.

He said persistent upsurges in oil prices remain the biggest risk to low and stable prices in the economy and will continue to pose the biggest challenge to the attainment of the 5 percent inflation which the central bank has set to achieve.

"The risk to inflation outlook remains the persistently high oil prices, which threaten to delay the lowering of inflation to the 5 percent target by June 2006," Mullei said while releasing the Monetary Policy Statement.

He said appropriate monetary policy stance, improved weather conditions and a stable shilling exchange rate have helped reduce inflationary pressures to 11.9 percent in June 2005 from a peak of 19 percent in September 2004.

"In order to keep inflation under control, the CBK will continue with a tight monetary policy stance over the next one year to June 2006. It is expected that food inflation will continue to ease in the months ahead with favorable weather conditions," he said.

The CBK governor said the resumption of peace in the Horn of Africa and ongoing implementation of the Common External Tariff in the East African Community as well as the robust growth in Kenya's Common Market for Eastern and Southern Africa trading partners are expected to promote export-led growth.

Source: Xinhua