Kenya is one of the bright spots in Sub-Saharan Africa. With economic growth rates sustained at above 5 percent, Kenya has outperformed the regional average, for 8 consecutive years.
... See More + Robust domestic demand emanating from private consumption and government investment are the key drivers of growth, underpinned by a stable macroeconomic environment, lower oil prices, diversification, improved security perceptions, and ongoing structural reforms. Medium term economic prospects for Kenya remain robust. Ongoing public infrastructure investments will continue to play a ‘crowding-in’ role, easing transport and energy costs, and supporting economic expansion in construction andindustry. Private consumption will drive service sector growth, while agricultural sector will remain largely dependent on favorable weather conditions and timely availability of inputs. Though oil prices are expected to pick-up over the forecast horizon, Kenya’s external sector account will remain healthy on account of a steady increase in remittances, a rebound in tourism and a rise in foreign direct Investment (FDI). Nonetheless, there exist downside risks that can dent future growth prospects. Risks to Kenya’s future growth prospects that are not included in our baseline outlook emanate from both external and domestic sources. On the external front, these include weaker than expected growth in the global economy, volatility in global financial markets and a spike in oil prices. On the domestic front, these include delays to fiscal consolidation, adverse weather developments, and potential uncertainties associated with the run-up to 2017 elections that could lead to a wait-and-see attitude by investors, thereby dampening short-term growth prospects.
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Working Paper (Numbered Series) 109575 OCT 01, 2016
Ethiopia’s remarkable socio-economic transformation over the last decade has been marked by: a reorientation of expenditure from recurrent to capital; a significant devolution of resources from Federal Government to Regions; and a clear prioritization of infrastructure spending, while protecting spending on education at four percent of GDP.
... See More + The Government of Ethiopia has also leveraged external resources to boost spending in pro-poor sectors, particularly health and social protection. As a result, Ethiopia is home to the largest social safety net program in Africa, and has also achieved remarkable health outcomes using cost effective approaches. Recent investments have seen a significant build-up of capital stock, with capital spending at sector level pointing towards increased service capacity. The current public investment-led strategy requires to be complemented by increased budgetary provisions in operations and maintenance so that new investments translate into enhanced service coverage and delivery. As Ethiopia lays the foundation to become a middle income country, and the changing global environment implies declining external assistance, it is imperative that domestic taxation activity support this transition. The current tax-to-GDP ratio is low compared to peer countries, and the tax structure would benefit from increased contributions by direct tax sources. Therefore, there is an immediate need for advancing tax reforms and improve capacity and quality of tax administration. Broadening the tax bases, through review of exemptions, as well as review of tax rates might be venues to consider. Additional revenues will create the much-needed fiscal space to increase funding for operations and maintenance for service delivery, and support fiscal sustainability. As a follow-up to this Public Expenditure Review, the Government of Ethiopia has asked the World Bank to provide further analytical support, with a view to enhance domestic revenue mobilization through simpler and more efficient taxation, while retaining equity priorities in public finances.
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The Kenya CEM has five main messages. First, Kenya has performed well in the past decade in terms of economic growth, and modern services are behind the acceleration of growth.
... See More + Expansion in these services, such as financial intermediation and mobile communications have stimulated demand for other services such as trade. The CEM discusses how to maximize the potential of services, especially given that most formal, high quality jobs are created in this sector. Second, agriculture, which still contributes to over a quarter of the economy, and manufacturing have stagnated. The CEM discusses the reasons behind this stagnation, noting that agriculture and manufacturing have not been able to create enough jobs for Kenya’s growing working age population. Most of the jobs are created by the informal economy and are concentrated in low productivity segments of trade, hospitality, and jua kali. Improving the ease of doing business is one way towards job creation and higher productivity. However there is still a need for creating job opportunities for the rural poor, for poverty reduction and achieving shared prosperity. Reviving agriculture, in particular, remains the pathway for poverty reduction. Third, accelerating growth to meet Kenya’s development goals requires technological advances and innovation that raise firms’ productivity. Fourth, achieving rapid growth will require macroeconomic stability to boost investment and savings. And as the government strives to build Kenya’s energy and transport infrastructure, this needs to be complemented with improvements in the public investment management process and better execution. Fifth, the discovery of oil opens a possibility for raising Kenya’s growth. Kenya’s recent oil discoveries, if used prudently, can contribute to achieving the Vision 2030 goals. The World Bank Group is proud of its long-standing relationship with Kenya, and looks forward to continuous collaboration with both National and County Governments and other partners. Working together, Kenya can realize its potential to lift millions of families out of poverty and achieve shared prosperity.
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This update comes in the wake of three game changing and mutually reinforcing trends. First, monetary policy in the United States (U.S.) will determine the direction of capital flows and currency stability.
... See More + Second, the persistent decline in commodity prices will determine winners and losers and third, the cooling and rebalancing of the Chinese economy is likely to see a recalibration and change in the direction of trade. Kenya’s growth will depend on the net impact of these global trends on the one hand and the domestic policy response on the other. Growth in 2015 is estimated at 5.6 percent, and is projected to rise to 5.9 percent in 2016 and 6 percent in 2017. The economy has created more jobs in the recent years, but these are low productivity mainly in the informal services sector and are not associated with higher value added. In the next ten years, nine million youth will enter the labor market, a majority will continue to find jobs in the informal sector. To improve productivity of these jobs, policy interventions can be geared towards increasing access to broad skills beyond formal education, creating linkages between formal and informal firms, and helping small scale firms enter local and global value chains. To encourage private sector growth and create better jobs, the business environment must improve. Finally, Kenya can leverage the changes in the global economy to recalibrate its trade as a platform for structural change and provide the impetus for higher levels of growth and creation of productive jobs.
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Working Paper (Numbered Series) 104289 MAR 01, 2016
This book is organized around three overarching themes under which various topics are aggregated. The first concerns human development and resilience, and discusses issues related to poverty, education, health and social safety nets.
... See More + This is the human chapter, dealing with crucial areas that are central for the successful development of individual Kenyans. The second theme, growth and competitiveness, delves into the structural issues that need attention for the economy to grow and become more competitive in the international scene. This section of the book discusses needs for infrastructure investments and energy development, along with steps Kenya needs to take to unleash its export potential. The third theme, governance, addresses issues around strengthening public financial management, improving transparency and accountability, and consolidating judicial reform.
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In 2012, Kenya's economy has been on a tightrope. Policy makers have had to walk a fine line between stabilizing the economy and maintaining the growth momentum.
... See More + While inflation has declined, the exchange rate stabilized, and the fiscal position improved, fundamental economic imbalances continue to make Kenya vulnerable to shocks. In the absence of economic and social turbulence, Kenya should grow at 5 percent in 2012 and 2013, which will still be substantially below its neighbors. Kenya has been benefitting from the integration and growth momentum in the East African Community (EAC), which has become one of the most vibrant economic regions in the world. However, despite impressive increases in trade between the five EAC partners in recent years, there is still a large untapped potential. EAC trade can increase several-fold if unnecessary restrictions in the trade of goods and services particularly nontariff barriers were removed.
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Working Paper (Numbered Series) 82380 JUN 01, 2012
As the world begins to feel the effects of climate change, the frequency of droughts is increasing in the Horn of Africa. In Kenya, the drought and food crisis affect welfare through two main channels.
... See More + The first channel is the increased mortality of livestock in drought-affected areas, which are home to 10 percent of the country's population. The second channel is by exacerbating increases in food prices, which are largely driven by worldwide price trends. Considering these two channels, this note identifies four broad policy changes that can reduce Kenya's future vulnerability to such shocks: (i) investment in people in the arid and semiarid lands; (ii) reform of Kenya's maize policy; (iii) review of the East African Community grain trade policy; and (iv) formulation of a unified social protection system.
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Over the last decade, Kenya's society and economy have changed fundamentally and these deep trends will continue. Rapid population growth and urbanization will create many new challenges which need to be managed well to support Kenya's economic take-off in the medium-term.
... See More + This fourth edition of the Kenya economic update argues that Kenya can turn the tide in turbulent times and make the most of the ongoing structural shifts. In 2011, Kenya will need to address short-term domestic and international shocks, including higher inflation, pressures on the exchange rate and, most importantly, a volatile political environment. The government will need to navigate through these shocks successfully and to continue with its economic reform program to achieve higher growth. At the same time, the government will be making major strategic decisions in Kenya's decentralization architecture which will shape the medium-term development prospects of the country. Economic success is possible, as the 5.6 percent growth in 2010 has shown. If growth will accelerate to an average of 6 percent this decade, Kenya will achieve middle income country status by 2019.
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Working Paper (Numbered Series) 63265 JUN 01, 2011
Kenya may be at a 'tipping point', the theme of the third Kenya economic update which has a special focus on the transformative impact of information and communication technology (ICT) and mobile money.
... See More + Over the last decade, ICT has outperformed all others sectors growing at an average of 20 percent per year. The benefits of ICT are starting to be felt in other sectors, and have contributed to the conditions for Kenya to reach this tipping point. Kenya has entered the new decade with renewed and stronger than expected growth. The passing of the new constitution, continued strong macroeconomic policies, and a favorable regional environment have created a new positive economic momentum. Kenya may again be positioned to experience high growth. Over the last three decades Kenya has experienced only two short episodes when economic growth exceeded five percent and was sustained for at least three consecutive years: 1986-88, and 2004-2007. Is Kenya again at the verge of experiencing another growth spurt? Will it last longer and go deeper than the previous two episodes?
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Working Paper (Numbered Series) 59435 DEC 01, 2010
Kenya has entered a new decade with renewed momentum for strong and sustained growth. Being part of Africa's strong recovery after the global crisis and a regional leader in services, Kenya has high hopes for a strong economic performance during this new decade.
... See More + After two years low growth, the World Bank projects 4.0 percent growth in 2010 which means that most Kenyans will again experience an improvement in their living conditions. To achieve and sustain high growth over the next decade, Kenya will need to address its economic imbalances, avoid domestic shocks, and manage the impacts of future external crises. The theme of this second Kenya economic update, "running on one engine", reflects the structural imbalance of Kenya's current economy-Kenya's strong engine is domestic consumption; its weak engine is exports. In order to restart the export engine, Kenya will need to address a number of issues, especially the infrastructure deficit. The port of Mombasa for example, is Kenya's most important and concentrated infrastructure asset. As the special focus section of this report concludes, the port needs substantial reform and upgrading to reach international standards and to meet the demands of a growing and increasingly integrated East African Community.
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Working Paper (Numbered Series) 54906 JUN 01, 2010
This is the first edition of the Kenya Economic Update. This title of this report has two meanings, which are both true for Kenya today. First, the economy seems to stand still as economic growth barely matches population growth, indicating that Kenya continues to operate below its potential.
... See More + Second, Kenya's economy has weathered four consecutive crises - post-election violence, global food crisis, global financial turmoil, and drought - well enough so that its economy is "still standing". This report looks at both of these dimensions and analyzes the weaknesses (and partial strengths) of the current growth momentum as well as Kenya's resilience, particularly with respect to the global financial crisis. This first issue of the Kenya Economic Update examines the ways in which the Kenyan economy has been affected by four waves of crises. Section one describes the growth outlook for 2009, and how the phenomenon of slow recovery manifested itself across the different sectors of activity. Section two drills deeper into the successive waves of crisis, the transmission mechanisms through which they affected the economy, as well as the governments response to date. Finally, section three concludes the economic update with scenarios for growth in 2010 and an analysis of the assumptions behind them.
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Working Paper (Numbered Series) 54905 DEC 01, 2009
