Domestic Economy

Kenya- Key economic indicators

2003 2004 2005 2006 2007 2008
Real GDP growth (%) 2.9 5.1 5.9 6.3 7.1 1.7
Gross national savings (% of GDP at mp) 10.1 12.2 13.4 14.9 13.1 14.8
Gross domestic investment (% of GDP at mp) 16.4 17.1 16.9 18 19.1 19.2
Consumer price inflation (avg. annual % change) 9.8 11.6 10.3 16.6 9.8 26.2
Government revenue and grants (% of GDP)* 20.2 21.3 21.5 20.4 21 21.8
Government budget deficit (% of GDP)* -2.51 -1.54 0.42 -2.39 -1.18 -3.69
Current Account balance (US$m) 146.2 -131.8 -252.3 -510.4 -1034.5 -1978.4
Exchange rate (end of period, Ksh per USD) 75.9 79.2 76.4 69.6 62.7 69.2
Foreign exchange reserves (months of imports) 4.2 3.4 3.2 3.5 4 2.7
Domestic public debt (% of GDP) 26.8 25.3 23.4 23.2 23.6 21.2
External public debt (% of GDP) 37.7 36.6 32.2 24.6 23.1 21.6

Source: World Bank. Please note that the data refers to fiscal year to June 30th (for example, 2003 refers to 2003/04)

Kenya is the hub for trade and finance in East Africa. The country’s economy is broad-based and built on a stable macro-economic environment which is anchored by both the government and the private sector. In recent years, Kenya has faced some economic challenges surrounding the global economic down turn and the aftermath of the 2008 post-election violence; however, the economy has attained an impressive growth of 4% in the first quarter of 2009.

Historically, Kenya has come a long way. After growing moderately during the 1960s and 1970s, the county’s economic performance was far below its potential during the 1980s and 1990s. In August 1993, inflation reached a staggering 100% with the government’s budget deficit exceeding 10%. To address these problems and the concerns of the bilateral and multilateral partners, the government implemented a series of economic reforms to stimulate the economy and rebuild sustainable growth. These included the suspension of some food tariffs, the restructuring of civil service, the privatization of publicly owned companies and the introduction of fiscal and monetary policies among others. The government signed into law anti-corruption legislation as well as the enactment of the Privatization Law in 2005.

Between 1997 and 2002, the economy grew by an annual average of 1.5% largely in part of poor agricultural, land and industrial policies. With a change of government and additional reforms, the country began notable growth process only after 2002.

Following the outbreak of violence that erupted after the December 2007 general elections, Kenya experienced a setback on its economy which relies heavily on tourism and agricultural production. For example, the Rift Valley was hardest hit, and is considered Kenya’s breadbasket supporting an agriculture sector that employs most Kenyans (75 per cent of the 9.5 million workforce – est 2008). It is also home to the country’s most famous game reserves.
On February 28th, 2008, Kenya placed into power a Coalition Government following the signing of a Peace Accord, which led to stability and opened a renewed opportunity for growth. The services sector, which is the main driver of the economy, accounted for as much as 59.5% of theGDP in 2008. That same year, tea exports totaled $850 million, while fresh horticulture exports fell to $838 million (from a record high of $1.12 billion in 2007). Tourism earned Kenya $762 million in 2008, a decline of 19% from 2007.

According to the Kenya National Bureau of Statistics (www.knbs.go.ke), sectoral performances have varied considerably this year, with the hotels and restaurants achieving the highest growth of 24.2%. A persistent drought, which has now eased, and the current global economic downturn have otherwise impacted Kenya, restraining the economy from attaining its growth potential.

Going forward, Kenya’s economic outlook remains positive as economic reforms will continue to shape policy. In June 2008, the government launched the long-term development strategy, Vision 2030 and the first Medium Term Plan for 2008-2012. The focus will be on reconstruction (the main priority in the short-term), deepening structural reforms and governance, improving infrastructure, reducing income inequality and creating jobs.