Kenya prime minister optimistic about economy

By Andrew Stern

CHICAGO, May 21 (Reuters) - Kenya's economic growth will pick up again after slowing markedly in 2008, its prime minister said on Thursday, adding that the political violence that swept the African nation a year ago was an aberration.

Kenya's economy, largely dependent on agriculture and tourism, had expanded rapidly until last year, when growth shrunk to 1.7 percent from 7.1 percent a year earlier, due to the violence, commodity weakness and the global recession.

Speaking to a Chicago business group, Prime Minister Raila Odinga predicted economic growth would rise to 3 percent this year and expand by 5 to 10 percent in subsequent years.

"For this to happen, public funding is not enough," Odinga said, outlining Kenya's coalition government's strategy to enlist private companies and foreign aid donors to help expand East Africa's largest economy.

Kenya's central bank on Thursday cut its lending rate by 25 basis points to 8 percent to spur growth, in spite of a 28 percent inflation rate.

Analysts have forecast, on average, 2.5 percent growth for Kenya's $35 billion economy in 2009, down from an earlier prediction of 4.1 percent.

Odinga predicted U.S.-Kenyan trade would eventually get a lift from the launch on June 3 of direct flights between Nairobi and Atlanta by Delta Air Lines Inc (DAL.N), which is a partner of Kenya Airways.

He acknowledged corruption plagued the country but promised a "non-tolerant regime" that will crack down on bribery at high levels and lift living standards for police and other functionaries to head off endemic petty corruption.