Recent Developments & Prospects
Economic Cooperation, Regional Integration & Trade
Economic & Political Governance
Public Sector Management, Institutions & Reform
Natural Resource Management & Environment
Thematic analysis: Structural transformation and natural resources
Authors: Walter O. Odero, Wilmot A. Reeves, Nicholas Kipyego
- GDP growth amounted to 6.9% and 5.7% in 2012 and 2013, respectively, while the 2014 estimate and the 2015 projection show economic expansion of 5.3% and 6.5%, respectively.
- In 2013 and 2014, the economy experienced a stable macroeconomic environment with single-digit inflation, whereas the political scene was dominated in 2014 by calls to amend the constitution.
- Reforms have been introduced in Kenya since 1990 to address critical differences in access to economic, political and social services, culminating in the introduction of 47 county governments in 2010.
GDP growth remained robust in 2013 at 5.7% based on rebased statistics, and stood at 4.4%, 5.8% and 5.5% in the first three quarters of 2014 compared with 6.4%, 7.2% and 6.2% in comparable quarters of 2013. According to the central bank’s economic monthly review of November 2014, growth was mainly supported by expansion in construction, manufacturing, finance and insurance, information, communications and technology, and wholesale and retail trade. The economy slowed in the third quarter of 2014, partly due to a sharp drop in tourism following terrorist attacks in the country. Overall GDP growth is expected to amount to 6.5% and 6.3% in 2015 and 2016, respectively. Consumer price index (CPI) inflation is expected to remain in the single digits, at around 5%, during the same period.
The short to medium-term positive growth projections are based on assumptions of increased rainfall for enhanced agricultural production, a stable macroeconomic environment, continued low international oil prices, stability of the Kenya shilling, improvement in the security situation for a positive influence on the tourism sector; and reforms in the areas of governance and justice.
Political activity in 2014 centred mostly on the call by both the opposition party, Coalition for Reforms and Democracy (CORD), and county governments – the latter mainly seeking amendments of the constitution – to raise national government financial transfers to county governments from 15% to 45%, as well as on the trials at the International Criminal Court (ICC) of the President of the Republic of Kenya, his deputy and a journalist. In December 2014, the trial of the president was dismissed because of insufficient evidence. The trial of his deputy and the journalist are continuing in 2015.
Spatial inclusion has remained a challenge in Kenya since independence because of major differences in access to economic, political and social services, leading to political and ethnic conflicts with serious cases of fighting and displacement of persons in 1992, 1997 and 2007-08. The 2010 constitution attempted to address these differences by introducing 47 county governments and putting political, economic and social structures in place aimed at introducing equity in resource distribution. The national government is to allocate at least 15% of the latest audited accounts to the annual budgets of the county governments. The constitution also addresses marginalisation through affirmative action programmes and policies designed to redress any historical disadvantages.
Table 1: Macroeconomic indicators
|Real GDP growth||5.7||5.3||6.5||6.3|
|Real GDP per capita growth||3||2.6||3.9||3.7|
|Budget balance % GDP||-5.6||-8||-8.8||-8.3|
|Current account balance % GDP||-2.9||-7.5||-7.9||-11.2|
Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.