Kenya moves to lower middle income status

September 30, 2014
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According to economic experts the move will see Kenya's credit metrics appear more positive as public debt ratio will be measured as a percentage of larger GDP making it decline/FILE
According to economic experts the move will see Kenya’s credit metrics appear more positive as public debt ratio will be measured as a percentage of larger GDP making it decline/FILE
NAIROBI Kenya Sept 30 – Kenya’s Gross Domestic Product (GDP) has risen by 25 percent to Sh4.76 trillion following the government’s rebasing (new formula to calculate GDP) of the economy from the previous Sh3.8 trillion (which was rebased in 2001).

The rebasing lifts average per capita income in Kenya to USD 1,246 (Sh111.26), effectively meaning that the country moves to lower middle income status.

With the rebasing of GDP, Kenya’s growth rate for 2013 has also been revised higher, to 5.7 percent growth in 2013 from an estimated 4.7 percent.

According to economic experts the move will see Kenya’s credit metrics appear more positive as public debt ratio will be measured as a percentage of larger GDP making it decline.

“However Kenya’s favourable revenue mobilisation ratio, long in excess of the regional average, will also moderate. This suggests that there should still be room to raise revenue mobilisation further,” said Razia Khan Managing Director Africa Global Market Research at Standard Chartered Bank.

She said the move to middle income status will also disqualify Kenya from some categories of concessional lending.

“Given its increasing reliance on non-concessional lending, this is not likely to have any immediate market impact,” she said.

Khan said the economy has demonstrated good momentum and has been growing faster than the official data indicated with robust business confidence, increasing capital expenditure plans and healthy private sector credit growth.

“However, the revised growth rates also suggest that Kenya’s output gap has been closing faster than previously believed. This should have implications for monetary policy and supports our view that the CBK may have to tighten policy more formally by the year-end,” she added.

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