Kenya has made significant political and economic reforms that have contributed to sustained economic growth, social development, and political stability gains over the past decade. However, its key development challenges still include poverty, inequality, climate change, continued weak private sector investment and the vulnerability of the economy to internal and external shocks.
Kenya ushered in a new political and economic governance system with the passage of a new constitution in 2010 that introduced a bicameral legislative house, devolved county government, a constitutionally tenured judiciary and electoral body. The first election under this new system was held in 2013. The August 8, 2017 presidential elections were nullified on September 1, 2017 by the Supreme Court, and a new presidential election was held on October 17, 2017. President Uhuru Kenyatta was sworn in for a second and final five-year term on November 28, 2017.
Over 2015-2019, Kenya’s economic growth averaged 5.7%, making it one of the fastest growing economies in Sub-Saharan Africa. The performance of the economy has been boosted by a stable macroeconomic environment, positive investor confidence and a resilient services sector.
The COVID-19 shock has hit Kenya’s economy hard through supply and demand shocks on both the external and domestic fronts and caused activity to slow sharply in 2020 (real gross domestic product is estimated to have contracted by 0.3% in 2020). Agricultural output grew robustly, but manufacturing and many services subsectors (e.g., tourism, education) were severely disrupted.
A regional locust infestation, which started early 2020, also affected some parts of Kenya, especially the North East. Nevertheless, moving into 2021 a significant economic recovery has been underway, although it remains highly uneven across sectors (with some, such as tourism, remaining under severe pressure), and there continues to be elevated uncertainty regarding the outlook. The downside risks include a weaker than expected global economic recovery undermining Kenya’s export, tourism and remittance inflows, renewed disruption to domestic economic activity from the pandemic, fiscal slippages, and weather-related shocks.
World Bank support to Kenya’s pandemic response includes emergency funding to strengthen medical services and reduce the spread of the virus, as well as budget support to help close the fiscal financing gap while supporting reforms that help advance the government’s inclusive growth agenda.
In addition to aligning the country’s long-term development agenda to Vision 2030, the President outlined the “Big Four” development priority areas for his final term as President prioritizing manufacturing, universal healthcare, affordable housing, and food security.
Kenya has made major gains in social development, including reducing child mortality, achieving near universal primary school enrollment, and narrowing gender gaps in education. Interventions and increased spending on health and education are paying dividends. While the healthcare system has faced challenges recently, including due to COVID-19 (coronavirus), 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 has the potential to be one of Africa’s success stories, given its growing youthful population, a dynamic private sector, skilled workforce, improved infrastructure, a new constitution, and its pivotal role in East Africa. Addressing the challenges of poverty, inequality, governance, the skills gap between market requirements and the education curriculum, climate change, low investment and low firm productivity to achieve rapid, sustained growth rates that will transform lives of ordinary citizens, will be a major goal for Kenya.
Last Updated: Mar 30, 2021