By Duncan Miriri and Edmund Blair
NAIROBI, Oct 1 (Reuters) - An upward revision of Kenya's economic output shows that the country's economic reforms are paying off, with the potential for future growth to exceed 6 percent a year, an International Monetary Fund (IMF) official said on Wednesday.
Kenya announced on Tuesday that last year's gross domestic product was $53.4 billion - 25 percent higher than previously stated - after updating the base year for its calculation. Growth for 2013 was revised up to 5.7 percent from 4.7 percent.
Armando Morales, the IMF representative in Nairobi, said the new numbers ended the puzzle of why economic reforms in recent years were not being reflected in more robust growth numbers.
"Now we have found confirmation that, using better statistics, these reforms have been translating to growth," he told Reuters. "Our perception was of a booming economy; an economy ready for take-off."
Previous figures had consistently underestimated the growth rate, in spite of reforms including a review of taxes to boost revenue, a tightening of banking and capital market regulations to cut risk, improvement in the management of public finances and general economic governance.
Morales, however, said the Kenyan economy still faces challenges, particularly after a spate of militant attacks over the past year that have dented the tourist trade, a major source of hard currency.
The Washington-based fund is likely to lower its 2014 growth forecast of 5.5-6 percent to closer to 5 percent, Morales said, after the Kenyan government revised its forecast to 5.3-5.5 percent from 5.8 percent after the rebasing exercise.
But Morales said Kenya could push growth above 6 percent if it can be more consistent on economic policy, referring to interest rates decisions that resulted in high inflation and currency weakness in recent years.
An IMF team will visit Nairobi this month to discuss the government's request for an "insurance-type" lending facility to cushion against unforeseen shocks such as weather-related problems for the farming industry.
Morales said the rebasing exercise made it easer to "fine tune" a new programme because it offered a more accurate picture of the economy, but added that inflation needs to be watched closely to ensure it does not stray too far from the mid-point of the government's 2.5-7.5 percent target range.
"We would like to see how the pattern evolves over the next three months," he said.
Editing by David Goodman