June 05, 2024
Kenya’s real GDP growth rose to 5.6% in 2023, surpassing the previous year’s rise of 4.9%. However, GDP growth in 2024 is predicted to drop down to 5.0%. This is according to the latest Kenya Economic Update (KEU) issued today, which adds that the 2023 rise was driven by the rebound of the agriculture sector, following good weather conditions, and the services sector, with tourism and financial services contributing the most.
According to the 29th edition of the Kenya Economic Update: Fostering Trade for Robust Growth and Dynamic Job Creation, tight fiscal and monetary policies, elevated inflation, rising debt service obligations, high borrowing costs that constrained access to global capital markets, and the sharp depreciation of the shilling, framed Kenya’s macroeconomic performance in 2023. Despite this challenging environment, Kenya’s economic development displayed resilience and growth, led by the government’s strategic policy actions that have enhanced general macroeconomic stability.
The KEU expects a GDP rise of 5.2% on average period 2024-26, anchored by excellent weather conditions for the agricultural sector, a rebound of industry, and the resilience of services. The projection anticipates adequate rainfall, government maintaining on the fiscal consolidation path, and the ongoing implementation of the administration’s structural reform plan. The analysis anticipates that the private sector will play a bigger role in Kenya’s medium-term recovery.
Kenya’s efforts in trade integration might significantly contribute to considerable economic development and job creation. Trade trends reveal that agriculture is the major contributor to Kenya’s exports, followed by minerals and chemicals. Kenya’s exports, meanwhile, have considerably underperformed. It is key to note however that the country has not diversified its products in the previous several years and has lost competitiveness in the countries to which is has been exporting.
Kenya is actively utilizing global, continental, and regional channels to augment its global economic position and foster greater integration of commerce. Beyond only increasing exports, Keny also wants to convert this growth into the creation of job opportunities.
World Bank Senior Economist for Kenya Naomi Mathenge stated, “Even though the export-to-GDP ratio has been declining, the potential for export expansion remains significant.” “In order to fully benefit from trade integration’s robust job creation and economic growth, targeted policy considerations are crucial.”
Revision of trade and investment policies to promote export orientation, consistency and predictability of policy, fortification of institutions, development of strategic skills, multimodal support for export orientation, and attracting more foreign direct investment as a lever for optimizing the role of trade integration are a few of these policy considerations. Additionally, the nation must reduce vulnerabilities associated to trade and climate change, particularly with regard to agricultural exports.
(Source: The World Bank)
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