A key regional player in East Africa, Kenya is a major communications and logistics hub, with an important Indian Ocean port and strategic land borders with Ethiopia, South Sudan, Uganda, Tanzania, and Somalia. It has a population of about 48.5 million (2016). A new constitution in 2010 introduced a tenured judiciary and bicameral legislative house. It also devolved county government—a move that has had a largely positive impact on service delivery in rural areas. Elections in August 2017 returned President Uhuru Kenyatta to office for a second term, but were nullified in September by Kenya's Supreme Court, paving the way for another presidential election in October against his main rival, Raila Odinga. In the end, Odinga boycotted the second election (saying it would not be run fairly) and Kenyatta was sworn into office. But the atmosphere of political uncertainty the disputed elections created contributed to a stalling of the economy. And political tensions in Kenya worry its neighbors as well, which use the Kenyan port of Mombasa as a transit point for their imports and exports.
Devolution is the biggest gain from the 2010 constitution, transforming political and economic governance, and strengthening accountability and public service delivery at local levels. Key development challenges remain, though, including poverty, inequality, and climate change. After faltering in 2008, economic growth has resumed, reaching 5.8% in 2016 to place Kenya as one of the fastest growing economies in Sub-Saharan Africa. This expansion was boosted by a stable macroeconomic environment, low oil prices, a rebound in tourism, strong remittance inflows, and government-led infrastructure development initiatives.
Looking ahead, near-term GDP growth is expected to decelerate to 5.5% in 2017 because of drought, weak credit growth, security concerns, and a rise in oil prices. Medium-term GDP growth should rebound to 5.8% in 2018 and 6.1% in 2019 respectively, depending on the completion of ongoing infrastructure projects, the resolution of slow credit growth, and the strengthening of the global economy and tourism.
In the long-term, the adoption of prudent macroeconomic policies will help safeguard Kenya’s robust economic performance. This includes the implementation of fiscal and monetary prudence and lowering the deficit down to 4.3% by FY19/20, as per the Medium Term Fiscal Framework. Fiscal consolidation needs to avoid compromising public investment in critical infrastructure key to unlocking the economy’s productive capacity.
On social development, Kenya met some Millennium Development Goals (MDGs) targets, including reduced child mortality, near universal primary school enrolment, and narrowed gender gaps in education. Interventions and increased spending on health and education are paying dividends. And, while the healthcare system has faced challenges, devolved health care and free maternal health care at all public health facilities will improve health care outcomes and develop a more equitable health care system.
Kenya's youthful and growing population, dynamic private sector, highly skilled workforce, improved infrastructure, new constitution, and pivotal role in East Africa, give it the potential to be one of Africa’s great success stories. Addressing poverty, inequality, governance, and the skills gap (between market requirements and the education curriculum) will be major goals, as well as problems of climate change, low investment, and low productivity. Only when these have been addressed can sustained growth rates transform lives of ordinary Kenyan citizens.
Last Updated: Oct 10, 2017