NAIROBI, Kenya, May 17- Latest statistics released on Tuesday show that the Kenyan economy expanded by an impressive 5.6 percent in 2010 buoyed by a significant growth in various key sectors such as agriculture, finance, wholesale and retail.
Picking up from the 2.6 percent Gross Domestic Product (GDP) rate of 2009, the statistics indicated that the improved performance was anchored on a stable macroeconomic environment, favourable weather conditions and increased investments in the country.
Planning Minister Wycliffe Oparanya said relative political stability and the \’feel good\’ factor that followed the promulgation of the new Constitution also contributed to the improved performance.
"Last year, there was stability in the fluctuations of exchange rates; we had adequate rainfall and we had a stable political environment. When we look at the main sectors of the economy, agriculture which had contracted by 2.6 percent in 2009 recovered to 6.3 percent," he said while releasing the Economic Survey Report of 2011.
The wholesale and retail sector expanded to 7.8 percent from 3.9 percent registered in 2009 while the finance intermediation was up 8.8 percent from 4.6 percent as the manufacturing industry whose growth has almost stunted posted 4.4 percent from the 1.3 percent in the period under review.
It also helped that there was easily accessible and affordable credit to the private sector following the Central Bank of Kenya\’s (CBK) move to cut its benchmark policy twice during the year. This served as a signal from the CBK to local commercial banks to reciprocate and lower their lending rates in order to stimulate access to loans.
The low interest rates also went in tandem with inflation which was contained within the government\’s target of five percent, a factor that was attributed to the stable food prices and cut-throat competition in the telecommunications sector.
Read the economic survey here in full.
The growth momentum was however not sustained in politically sensitive fields such as the stock market which posted a dip going into the fourth quarter.
Mr Oparanya blamed political anxiety following the naming of the six suspected masterminds of the 2008 post election violence by International Criminal Court Prosecutor and the subsequent realisation that they would be tried at The Hague.
Going forward, this impetus is likely to be slowed down this year given the high commodity prices and an unpredictable political environment as the country enters the 2012 electioneering period.
Compared to the annual average cost of $79.16 per barrel in 2010, crude oil prices have already accelerated to around $100 and are projected to fluctuate between $90 and $120 in coming months.
The country\’s debts are also soaring standing at Sh1.1trillion at the end of June 2010 as the government continues to borrow heavily especially from the domestic market to fund its ever expanding financing obligations.
Despite the challenges, the minister expressed optimism that with the execution of several interventions that can inform the country\’s planning process over the next few years; the economy can achieve the projected rate of between 3.5 percent and 4.5 percent in 2011.
The ministry proposes that the government needs to ensure an improvement in food productivity, population control and the speedy implementation of the constitution to enable the country weather the storm.
"We have to widen social protection policies for about 14 million vulnerable Kenyans and ensure that they have a decent life. I am also advising that we should remove tariffs on imported grains for a limited time to ensure that these Kenyans are taken care of.
We need also to fast track the implementation of the national land policy to ensure effective land utilisation," he emphasised.
These suggestions did not seem to go down well with Treasury which emphasised that they were just proposals.
"We don\’t really have to agree with everything that they say. As he (Mr Oparanya) says, it is a recommendation and we have our own views about some of the things that we shall be doing," said Finance Assistant Minister Oburu Odinga.
Speaking to Capital Business after the report was released, Dr Odinga said the Treasury projects that the 2011 GDP growth rate will not drop below five percent.
"Their (Planning Ministry) figures are conservative. Our benchmark for growth is about five percent. As far as we are concerned, this will be our worst case scenario," he maintained.
He based the Treasury\’s forecast – which he termed as realistic – on the fact that the government is continuing to invest heavily in infrastructure development and that they are banking on adequate rainfall that should support the agriculture and to some extent the energy sectors.
Although remarkable, the assistant minister acknowledged that the 5.6 percent growth rate was still below the seven to 10 percent targets outlined in the Vision 2030 and which are required to transform Kenya into a middle income and industrialised State.