Friday, 8 May 2015

Kenya’s 2014 Economic Growth Facts & Figures.

Last week, the Kenya National Bureau of Statistics, KNBS released the 2015 Economic Survey report. In the report, they clearly outlined the economic performance of our nation in the year 2014 and also succinctly explained the expected economic performance for this year. Kenya is said to have recorded a 5.3% economic growth rate in 2014 which is the second lowest growth rate for the last five years bearing in mind the recent economic rebasement that we had. In 2013 the rate of economic growth rate was 5.7%, in 2012 it was 4.6%, in 2011 6.1% and in 2011 it was 8.4%(GDP at market prices). It should be noted that the 5.3% rate of economic growth was a downward revision of the earlier projection of 5.8%. This year the World Bank and other economists have forecasted a 6% economic growth rate.

 The main drivers of the economy in the year 2014 notably were mining and quarrying, construction, financial and insurance activities, wholesale and retail trade, electricity supply, agriculture, fishing and forestry and manufacturing. All these registered positive rates of growth except accommodation and food services that recorded a second consecutive negative growth rate.

Our economic backbone that is agriculture grew by 3.5% last year compared to 5.2% in 2013. This slump is mainly attributed to the erratic rains experienced in the country. With Kenya and other developing countries being strongly anchored to rain-fed agriculture, it poses a great danger to economic performance suppose we record very low levels of rainfall. This is a challenge that the policy makers and shapers need to focus on if we indeed harbor dreams of actualizing the idealized and ambitious Vision 2030.

The tourism sub-sector has for the previous years been one of the economic “cash-cows” for our economy. From the statistics given by KNBS, the number of international tourism arrivals declined from 1.52 million in 2013 to 1.35 million last year translating to 11.1% . This contraction in the number of international arrivals further led to a decrease in the tourism earnings by a significant percentage of 7.3. This implies that the earnings from tourism took a dip from Kshs.94 billion to Kshs.87.1 billion. The explicit cause of this particular decline is insecurity. It can be recalled that last year as a country we had a number of attacks in several places including Mpeketoni in Lamu, Mandera and a series of grenade attacks in Nairobi and these negatively impacted on tourism as they led to the issuance of travel advisories  by countries which have often contributed largely in the number of tourists who visit Kenya. More so, the fear of the spread of the deadly Ebola disease also led to the reduction in the number of tourists.

As it is precisely and concisely highlighted in Vision 2030, the manufacturing sector is envisaged to be the leading sector by the time we get to 2030. But if its performance is to go by, then the path ahead seems to be with lots of curlicues. In 2014, this sector posted a 3.4% rate of growth compared to a relatively impressive growth of 5.6% in 2013. My opinion is that we have not embraced the requisite fundamentals needed to engineer modest to rapid growth and expansion of the sector. For us to have a robust manufacturing sector, then the key lies in establishing agro-based industries which will effectively spur growth of inter-related industries.

Building and construction sector had an impressive growth of 13.1% in 2014 compared to 5.8% in 2013. The expansion of real estate, and the continued construction of new roads and railway lines and the recarpeting of the existing roads fuelled the growth of this sector. Funds allocated to the sector from both the government and private lenders were an impetus for this improvement.  Credit extended by the commercial banks towards the building and construction sector increased by 13.1% to Kshs.80.4 billion from Kshs.70.8 billion in 2013. It is also worthy to note that cement consumption grew by 21.8% last year to stand at 5.2 million tones.

The energy sector performed relatively well last year. The total capacity of electricity installed increased from 1717.8MW in 2013 to 1798.3MW in 2014 representing 4.7%. This expansion was due to the increase in the geothermal capacity. In addition, total electricity generated increased by 8.2% to 9138.7GWh. The domestic demand for electricity went up by 3.8% from 6928.1GWh in 2013 to 7768.6Gwh in 2014. The Rural Electrification Programme seems to be progressing smoothly because as at July 2014 the number of individuals connected was 528,552 which was a 16.5% increase. The total quantity of petroleum products that were imported increased from 4.0 million tonnes in 2013 to 4.5 million tonnes in 2014. Hence, as a result, the import bill of these petroleum products expanded by 5.6% to Kshs.333.1 billion. The increase in the total quantity of imported petroleum products and the subsequent rise in the petroleum import bill are attributable to the increase in the total domestic demand that shot up by 5.3% to 3.9 million tonnes last year.

In matters transport and storage, the sector posted an improved growth rate of 5% compared to 1.22% recorded in 2013. The total freight transported through rail rose by 24.3% from 1.2 million tonnes to 1.5 million tonnes in 2014. The total quantity of cargo handled at the Port of Mombasa increased from 22.3 million tonnes in 2013 to 24.9 million tonnes in 2014 which translates to an 11.7% increase. At the airports, the total air passenger traffic went up by 7.9% whilst the cargo traffic handled rose by 6.8%.  Nevertheless, there was a 9.1% increase in the total number of newly registered motorvehicles meaning that the figure stood at 102,606 units in 2014 compared to 94,017 units in 2013.

The information, communication and technology sector is for sure the next frontier that will superbly drive Kenya’s economy. In 2014 the sector grew by 13.4% compared to 12.3% in 2013. The usage and penetration of the internet within the Kenyan borders was at 38.3%.  Mobile money subscriptions in the year under review clocked 26 million which represents about 60.6% penetration rate of the total population. Mobile money services continued to perform positively. The cash deposits through these services stood at Kshs.1,269 billion compared to Kshs.1,033 billion in 2013. Cash transfers via these services increased by an impressive 24.7% from Kshs.1,902 billion in 2013 to Kshs.2,372 billion in 2014.

On the macro environment,  the economy posted mixed results. The Central Bank Rate was maintained at 8.5% as a measure to ease inflation. However, the rate of inflation increased from 5.7% in 2013 to 6.9% in 2014. On international trade, the country’s trade deficit worsened as a result of a high import bill. The imports grew by 14.5%  which is Kshs.1,618.3 billion against the exports which increased by 6.9% representing Kshs.537.2 billion. There isn’t no doubt that our balance of trade worsened last year. Again, this is an economic situation where several policy interventions are to be made if we are to avert the “Dutch Disease” infection. Consequently, the trade balance deficit worsened by 18.7% from Kshs.911 billion in 2013 to Kshs.1081.1 billion in 2014. Coupled with this, the current account deficit increased by 30.2% to be at Kshs.536.1 billion. 799,700 jobs are said to have been created in both the formal and informal sectors. But is this really the situation on the ground? Well, a huge chunk of these jobs were created by the informal sector. In fact, the modern sector created 27,900 less jobs than in 2013. In the year 2014, the modern sector created 106,300 jobs compared to 2013 in which 134,200 jobs were created.

The number of education institutions rose by 3.2% from 77,197 in 2013 to 79,641 in 2014. The enrolment in the local universities went up by 22.8% with the number of university students increasing from 361,379 to 443,783. On health, 40 new health institutions were established totaling to 9,959 health facilities. The registered number of medical personnel increased by 8% from 112,576 in 2013 to 121,578 in 2014. In spite of all these positives in the health sector, deaths caused by malaria were at 11.6% of the total deaths while the ones caused by pneumonia were 10.9%.

 For the economy to leap forward the primary consideration would be to fix the challenges to insecurity. Threats to a secure environment scare away investors and this of course hinders more capital inflows and investments and the tourism sub-sector is normally hard-hit. Tourism is already limping and experts figure out that it will take around three years to revamp it. The onus is solely on the government to tackle cases of insecurity. However, I am optimistic that this year we can attain an economic growth rate of 6% with the main drivers being building and construction and the ICT sector. Let’s sit, watch and wait for a similar period of time next year when we shall be looking and analyzing the 2015 economic performance.

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