M a r k e t N e w s

Kenya Industrial & Trade Developments and Prospects

Posted on : Thursday, 29th January 2015

 Real GDP grew by an annual average of 3.7% over the 2008-12 period, with agriculture growing by only 0.6% and the industrial and services sectors by 4.0% and 4.5%, respectively. The short-term outlook is positive, with projected GDP growth reaching 5-6% over the next three years, mainly driven by higher private-sector investments and increased exports. Services, especially, finance, ICT and construction, are the expected drivers of GDP growth. The discovery of oil, gas and coal since 2012 might have the potential to boost Kenya’s overall socioeconomic development, but exact deposit quantities as well as fiscal and economic impacts are yet to be fully estimated.

The government has implemented sound macroeconomic policies in recent years, resulting in robust macroeconomic fundamentals. A prudent fiscal stance has kept Kenya’s budget deficit at an average of 4.9% of GDP during the last 5 years, albeit performing below its East African neighbors.

The deficit is projected to narrow to below 4% in the short term, mainly on account of continued fiscal discipline and increased revenue from improved tax collection under the Public Financial Management (PFM) Act 2012 and the Value Added Tax (VAT) Act 2013 as well as the rationalization of recurrent expenditure. Kenya’s tax revenue to GDP ratio, estimated at 20.1% in 2013/14, remains high by regional standards, compared to Tanzania’s 18% and Uganda’s at 13%.

In 2013, the Central Bank of Kenya (CBK) continued to maintain an expansionary monetary policy stance. CBK eased its monetary policy stance since July 2012, reducing the central bank rate (CBR) from 18% in June 2012 to the current level of 8.5%.

The last WB/IMF Debt Sustainability Analysis completed in April 2013 shows Kenya facing a low risk of external debt distress. All external debt indicators remain well below the debt burden thresholds under the baseline scenario, and no thresholds are breached under any of the standard stress tests. However, the IMF recommended pursuing policies to reduce Kenya’s vulnerability to external shocks and the public debt-to-GDP ratio further. With a view to raising debt internationally to avoid crowding out the private sector, the government intends to issue a USD 2 billion sovereign bond in quarter one of FY 2013/14.

Agriculture recorded growth of 3.8% in 2012 compared to suppressed growth of 1.5% in 2011. The sector contributed 29.9% of GDP in 2012. Marketed production rose by 3.9% from KES 331.8 billion in 2011 to KES 344.6 billion in 2012. The sector recorded 8.1% and 5.0% growth in output in the first and second quarters of 2013 respectively, compared with growths of 2.1% and 2.0% in the first and second quarters of 2012, respectively.

In 2012, the industrial sector contributed 18.3% of GDP (of which manufacturing was only 10.4%). The manufacturing sector decelerated from an expansion of 3.4% in 2011 to 3.1% in 2012. The slower growth was attributed to: high cost of production; stiff competition from imported goods; high cost of credit and political uncertainty due to the impending 2013 general elections. The sector grew by 4.2% and 4.3% in the first and second quarters of 2013 compared to 1.4% and 2.1% in the first two quarters of 2012.

The services sector contributed 54% of GDP in 2012. Tourism earnings, which are a key source of foreign exchange earnings, decreased by 1.9% from KES 97.9 billion in 2011 to KES 96.0 billion in 2012. International visitor arrivals decreased by 6.1% from 1.8 million in 2011 to 1.7 million in 2012, due to the slowdown in the global economy, especially in the euro area, coupled with travel advisories following security concerns. The number of tourist arrivals declined further by 7.0% from 1 257 869 in the year to July 2012 to 1 169 350 in the year to July 2013. Of the total tourist arrivals, 84.5% were through the Jomo Kenyatta International Airport, Nairobi and 15.5% through the Moi International Airport, Mombasa. Building and construction recorded growth of 4.8% in 2012 compared to 4.3% in 2011. Loans and advances to the sector increased by 36.2% from KES 50.8 billion in 2011, to KES 69.2 billion in 2012.

Source : www.afribiz.info
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