Economic growth is expected to reach 3.9% in 2010 due to improvements in agriculture and tourism sectors.

Inflation will reach an average 16% this year, but will reduce to 9% in 2010, according to the Kenya Institute of Public Policy Research and Analysis (KIPPRA).

Growth was an average of 27% in 2008, and now stands at about 18%.

KIPPRA released the Kenya Economic Report 2009 on Wednesday and warned a complete economic turnaround is dependent on risks relating to the global financial crisis, political stability, weather and implementation of political reforms.

Kenya has suffered from serious drought which the Central Bank Governor Njuguna Ndung’u said has had a very negative impact, even worse than the global crisis.

“In the medium term, overall inflation rate is expected to ease. International oil prices are expected to stabilise and, locally, effective implementation of the government reform agenda coupled with prudent fiscal and monetary policy should help ease inflation,” said the report as reported by Business Daily.

The report is the first to analyse local and global economic data in relation to Kenya and will be released annually.

It identified key challenges to improving the investment climate, as well as ways to encourage flow of remittances through formal systems.