The latest Kenya Country Economic Memorandum - Seizing Kenya’s Services Momentum, analyzes the key drivers and constraints to boosting inclusive long-term growth and provides policy options for reforms. While growth in Kenya has been solid, there is a need to increase productivity and investment to create much-needed jobs.
This report looks specifically at how including the services sector–a sector that is growing and becoming increasingly more traded–in Kenya’s growth strategy can contribute to long-term growth and job creation, including in non-services sectors. The report looks at five ways that services can contribute to this:
- SHIFT the services sector to higher-value-added activities. Knowledge-intensive “global innovator” services (such as IT, financial, and professional services) employ only 2% of workers in the economy, but they contribute to 14% of GDP and 19% of growth. Growing these services can provide important benefits but will also require a skilled workforce.
- LINK services better to increase the enabling role. Services enable growth in other sectors, including manufacturing. However, compared to other countries, the linkages between services and other sectors are weaker in Kenya.
- BOOST the productivity of the services sector. This means adopting better technology, making markets function better, and facilitating business entry. While some Kenyan firms are technological leaders, many are far from the global frontier. Services markets can also be made more competitive, including by addressing the presence of the state in certain sectors.
- TRADE and investment. Restrictions to services trade and investment remain high and are higher than in the region. Substantial barriers to cross-border data flows also exist, hampering digital trade.
- SECURE livelihoods. The services sector also matters from the perspective of inclusion: it employs many people, and part of the sector is highly informal. It also provides many services to the poor – with technology bringing new opportunities.
Policy actions are needed to seize on the potential of the services sector. This report provides directions for policies to enable long-term inclusive growth–for the benefit of both services and non-services sectors.
This report was prepared by a team led by Alex Sienaert (Lead Economist, EAEM1) and Elwyn Davies (Senior Economist, ETIIC).