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PRESS RELEASE

Kenya's Economy Growing Steadily, but Running on One Engine

June 2, 2010



Nairobi, June 3, 2010—Kenya’s economy is recovering steadily and is forecast to grow at 4.0 percent in 2010, according to a new World Bank report.  It even has the potential to improve further to 4.9 percent in 2011 if no shocks occur.

 

“Kenya’s economic recovery is good news,” says Johannes Zutt, Country Director for Kenya. “After two years of low growth, most Kenyans in 2010 will again experience improving living conditions.  But Kenya could do even better, and benefit from the strong growth momentum in the rest of East Africa.”

 

The Kenya Economic Update describes the Kenyan economy as “running on one engine” since growth is imbalanced, predominantly driven by domestic consumption fuelled by imports.  Exports, it explains, are weak — shrinking from 40 percent of total output in the 1960s to 26 percent in 2009 — due to the underperformance of the agriculture and manufacturing sectors.  This import-led growth has also created a large current account deficit.

 

“Kenya can restart the export engine,” says Wolfgang Fengler, Lead Economist for Kenya, “if it improves the business climate and closes the infrastructure deficit. In particular, the port of Mombasa needs upgrading.  It is the most important single piece of infrastructure in East Africa, and it remains a key bottleneck for trade”.

 

With this in mind, the latest edition of the Kenya Economic Update pays special attention to the port of Mombasa, Kenya’s most concentrated infrastructure asset.  Despite recent improvements, port reforms have not kept up with the momentum witnessed in other countries. Singapore, the busiest port in the world, ships 50 times more goods than Mombasa. It also takes on average 20 days for a container to reach Nairobi after arriving at the port. 

 

The Kenya Economic Updates are produced twice a year (June and December), and aim to inform and stimulate debate on topical policy issues to improve Kenya’s economic management. The first Economic Update, Still Standing: Kenya’s slow recovery from a quadruple shock was issued in December 2009.  With a special focus on the food crisis, it analyzed the economy’s recovery from successive shocks—post election violence followed by global financial, fuel and food crises in 2008, and drought in 2009.

 

The reports are prepared in close partnership with Kenyan stakeholders.  This second edition, which marks the passing of 50 years of the World Bank’s partnership with Kenya since the Bank approved its first credit to Kenya (on May 27, 1960), benefits from important contributions made by the Office of the Prime Minister, the Ministry of Finance, the Central Bank of Kenya, the Ministry of Planning and National Development, the Kenya Ports Authority, the Kenya Revenue Authority, the Kenya National Bureau of Statistics and the Kenya Institute for Public Policy Research and Analysis.

Media Contacts
In Nairobi
Peter Warutere
Tel : (254-20) 3226444
pwarutere@worldbank.org

PRESS RELEASE NO:
2010/447/AFR

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