FEATURE STORY

Kenya: A Bigger, Better Economy

September 30, 2014

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@ Una_Clara / FlickR

STORY HIGHLIGHTS
  • Kenya has crossed the threshold to become a low-middle income country following the rebasing of its National Accounts, including gross domestic product and Gross National Income
  • The size of the economy is 25% larger than previously thought, and Kenya is now the 5th largest economy in Sub-Saharan Africa behind Nigeria, South Africa, Angola and Sudan
  • Economic growth during 2013 was revised upwards from 4.7% to 5.7%, but challenges of poverty and income inequalities remain

NAIROBI, September 30, 2014— On the last day of September, Kenyans woke to the news that they were richer than they were the day before. The county’s national income of $55.2 billion was 25% higher and gross domestic product (GDP) per capita changed overnight, literally, from $994 to $1,256. There was widespread approval, and queries in equal measure, that Kenya had joined the league of lower middle income countries and moved up two places above Ethiopia and Ghana to become the fifth largest economy in Sub-Saharan Africa, behind Nigeria, South Africa, Angola, and Sudan.

With a revised growth rate of 5.7% in 2013, the bigger, better Kenya results from statistical improvements in the national accounts, including the gross domestic product (GDP). The statistical process, referred to as “rebasing” started four years ago, and has resulted in Kenya changing the base year for national statistics to 2009, from the previous 2001 base year. It has been carried out by the Kenya National Bureau of Statistics in the Ministry of Devolution and Planning, with support from the National Treasury and technical input from the World Bank Group (WBG), the International Monetary Fund (IMF) and the African Development Bank (AfDB).

“This is a normal exercise that takes into account changes in economic trends,” said Anne Waiguru, the Cabinet Secretary for Devolution and Planning at the launch of the revised national accounts statistics in Nairobi.

The rebasing process is rigorous and follows international standards and good practice for the results to be credible. A team of statisticians and economists from the WBG were among international peer reviewers of the exercise. Experts from Ghana, Gambia and Zambia statistical agencies also participated in the process.

“The rebasing exercise was conducted with professionalism, integrity and in accordance with the latest international technical standards,” said Diariétou Gaye, WBG Country Director for Kenya. “The new numbers are credible and they constitute an important improvement in the economic and statistical knowledge base for Kenya.”

The methodology was also endorsed by Morales Rogelio, IMF’s resident representative in Nairobi, who said it was in line with international standards. “Statistics determine how much we understand the economy and now we have a more accurate picture of economic activity,” he said.

Professor Terry Ryan, Chair of KNBS and Zachary Mwangi, acting director general, explained that the revised statistics captured structural changes in Kenya’s economic activity and consumer behavior over time. A significant inclusion is the real estate sector, which has become one of the fastest growing in recent years. Information and Communications Technologies (ICT), which was part of transport and communications previously, is now a stand-alone sector, capturing the tremendous growth that Kenya is making in this field, including being the leader in mobile money applications.  

What do the new statistics really mean for Kenyans? One issue is whether Kenya’s transition from low to middle income will wean it out of the IDA concessional funding window. Not so, said Gaye. Kenya is still eligible, as its Atlas Gross National Income (GNI) per capita is still below the IDA cut-off of $1,215.

Another emerging debate is on poverty and income distribution. Based on the last household survey of 2005-06 and the 2009 census, an estimated four in 10 Kenyans live below the poverty line, and inequalities across the country and population groups remain high. A deeper analysis, through a new household survey, is urgently needed to understand if poverty and inequalities have changed.

The WBG will continue to support Kenya to produce timely, quality statistics, which are important for planning and decision-making. Its commitment in the new Kenya Country Partnership Strategy (CPS) is to support statistical capacity development that will enable the country to make greater progress towards ending extreme poverty and improving shared prosperity for all Kenyans.