Kenya records 2.6pc economic growth

May 20, 2010
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, NAIROBI, Kenya, May 20 – Kenya’s economy expanded by 2.6 percent in 2009 up from a revised figure of 1.6 percent in 2008, according to the just released Economic Survey 2010.

Although the figure surpassed the government’s initial estimate of 2.3 percent earlier in the year, it fell within the projected growth outlook of between two to three percent that many organisations, including the World Bank, were working with.

Planning Minister Wycliffe Oparanya attributed the growth to a recovery of the tourism, construction and transport and communication sectors and the implementation of the Sh22 billion stimulus programme.

“Due to the problems we had in 2008, the government put up measures to stimulate growth so as to ensure investor confidence, to expand fiscal policy through economic stimulus and monetary policies focusing in maintaining price stability within a single digit. Because of these measures the economy was able to grow by 2.6 percent,” he said.

The survey reviewed economic performance of various sectors in 2009 done against a backdrop of internal and external shocks.

Increased international arrivals and the rapid recovery of the tourism sector which saw earnings go up 19.5 percent to Sh62.5 billion served to boost the industry’s contribution to the real Gross Domestic Product.

Cement consumption went up by 21.1 percent to 2.67 million tonnes driven largely by the increased infrastructure development projects as well as those funded under the Constituency Development Fund. This further boosted the performance of the building and construction sector which grew to 14.1 percent from 8.2 percent posted in 2008.

Growth in mobile phone subscriber numbers to 17.4 million and the expansion of traffic handled at the Port of Mombasa were also key in the impressive performance of the transport, storage and communications sector.

Agriculture, on which much of the growth has been pegged, however disappointed, contracting by a further 2.6 percent down from a 4.1 percent decline in 2008.

Poor weather conditions and the depressed demand for Kenya’s agricultural products in the international market were some of factors that contributed to the unfavourable performance of the sector.

This is despite the government’s intervention which saw it inject an additional Sh11.2 billion to Sh34.5 billion which was used to revamp the country’s irrigation schemes and construction of new ones.

During the year under review, development expenditure stood at Sh253.1 billion or 28.5 percent up from 23.1 percent in the previous year. Outstanding public debt as at the end of June 2009 was at Sh889.9 billion with external debts accounting for Sh488.2 billion.

The harsh global economic environment saw domestic exports grow by a meagre 0.80 percent while re-exports declined by 4.1 percent compared to growths of 23.3 percent and 71.8 percent respectively in 2008.

However increased foreign direct inflows coupled with an improvement of the country’s deficit saw the balance of payment record a surplus of Sh75.18 billion. In the last five years, Kenya recorded a deficit in the balance of payments of Sh327 billion in 2008 due to a widening account deficit.

The surplus however points to the fact that the country is increasingly receiving more capital inflows and Diaspora remittances as the global economy continues to recover.

Given the favourable weather conditions, the promising signs in many sectors of the economy, the minister expressed optimism that the country would be able to attain a GDP rate of between four and five percent in 2010.

An advisor at Treasury Prof Michael Chege termed the projections as ‘attainable’ despite the fact that the negative effects of the post election violence and the un-corresponding economic and population growth continue to cloud the country’s growth prospects.

“If you consider the weather effects, tourism is rallying, same with transport and communication and other sectors, we can easily do 4.5 or even five percent,” Prof Chege said.
 

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