A key regional player in East Africa, Kenya is a major communications and logistics hub, with an important Indian Ocean port and land borders with Somalia, Ethiopia, South Sudan, Uganda, and Tanzania. It has a population of about 48.5 million (2016). A new constitution in 2010 introduced a tenured judiciary and bicameral legislative house, and devolved county government, a move that has had a major impact on service delivery. 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 a run-off between Kenyatta and Raila Odinga, his closest rival. This was switched to a re-run for all the presidential candidates as rules governing the race were revisited.
The prolonged period of political uncertainty following the elections, and the prospect of another round of polling, have contributed to an apparent slowing of the economy, with the possibility of unrest a worry for Kenya's neighbors, too. The port of Mombasa is a key transit point not just for imports and exports to and from Kenya, but also to and from Uganda, Rwanda, South Sudan, and the Democratic Republic of the Congo.
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