Kenya economy grinds to 1.7pc

May 21, 2009
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, NAIROBI, Kenya, May 21- Kenya\’s economic growth slowed down to 1.7 percent last year from 7.1 percent recorded in 2007.

While releasing the 2009 Economic Survey Report, Planning Minister Wycliffe Oparanya said the economy performed poorly due to both internal and external factors such as the spill-over effects of the post election violence, the global financial crisis and the high energy costs.

“We didn’t do well in 2008. The violence disrupted the economic activities, unfavourable weather conditions where we had food shortages and of course we have been unlucky because politics have continued since the formation of the coalition government,” he regretted of the growth rate which is the slowest since 2002.

The GDP growth rate for last year had been revised several times down from the government’s figures of four percent.

These challenges affected most sectors of the economy apart from education and the building and construction industry which recorded a slight growth of 8.3 and 5.8 percent respectively from 6.9 percent and 3.7 percent posted in 2007. Agriculture, hotels and restaurants were severely affected and decelerated to negative 5.4 percent and 36.1 percent respectively.

The negative effects were also felt in the public finance field which saw the country’s debt go up. As at June 2008, total arrears stood at Sh748.5 billion with the domestic debts accounting for Sh413.5 billion.

International trade deficit widened to a deficit of Sh425.7 billion from a shortfall of Sh330.5 billion registered in 2007. The overall balance of payments deteriorated from a surplus of Sh63.3 billion in 2007 to a deficit of Sh33.2 billion last year. This was mainly due to decreased foreign direct investments inflows and widening merchandise trade deficit.

Despite the gloomy figures, Mr Oparanya predicted a slight recovery in 2009 and forecasted the economy to grow at between two to three percent this year.

He said economic growth would be determined by the performance of the agricultural and tourism sectors, the duration of the global downturn and the stability of the political environment.

“We need to deal with the political governance so that we restore investor confidence. Foreign investments last year decline because of the bickering,” he cautioned.

To mitigate the slow down in the economy, the Minister said the government has decided to spend more in infrastructure, aggressive marketing of Kenya as a tourist destination and subsidise agricultural inputs.

“We want to put more emphasise on irrigation. Instead of depending on rain-fed agriculture we want to irrigate more land. The government will enacted the Private Sector Security Bill, Organised Crimes Bill and facilitate the installation of CCTVs in major towns,” he said of the measures which he hinted would be included in the upcoming budget.

Mr Oparanya said the private sector is key to the country’s development and therefore the government would try and create a conducive environment for them to operate. Towards this end, he pledged that the government would lower the cost of production for manufacturing industry players and also deal decisively with the counterfeit menace.

With a GDP rate of three percent, the Minister acknowledged that the realisation of Vision 2030 was proving difficult. In the development blueprint, the government had projected that the economy would in the Medium Term plan pegged 2012 grow at 10 percent.

But he was optimistic that with the right measures, the country could still achieve its targets.

“Some of the measures will be outlined in the budget. However, it is an uphill task. Unless we get the 10 percent growth, it will be very difficult to create job opportunities for our youth,” Mr Oparanya added.

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