Implications of the Economic Survey 2018

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This article first appeared in my weekly column with the Business Daily on April 30, 2018

Last week the Kenya National Bureau of Statistics (KNBS) released the Economic Survey 2018 providing data on the economy for 2017. There are several data sets that should be noted and inform economic strategy going forward.

Firstly, the economy is estimated to have expanded by 4.9 percent in 2017 compared to 5.9 percent in 2016; that is a reduction of 1 percent year on year. This is unsurprising and in fact good news because previous analysis indicates that the Kenyan economy tends to slow down in an election year by about 1.2-1.4 percent. Thus, a reduction by 1 percent, particularly in a drought and election year, indicates the fundamental engines of the economy are robust. Growth was powered by accommodation and food services; ICT; education; wholesale and retail trade; and Public Administration.

Kenya’s top export earners last year included tea and, horticulture products. FILE PHOTO | NMG (source: https://www.businessdailyafrica.com/analysis/ideas/Implications-of-the-Economic-Survey/4259414-4535818-3tjw81/index.html)

Secondly, GDP per capita increased from KES 158,575.5 in 2016 to KES 166,314.4 2017. Inflation aside, the increase in per capita is good news and indicates that on the whole, economic growth is rising faster than the population thereby leading to net growth in income. However, poverty remains prevalent thereby implying the inequality remains a core problem in the country. The survey shared insights for the 2015/16 Household Survey which indicated that overall poverty stood at 36.1 per cent (16.4 million people), food poverty at 32.0 percent (14.5 million people), and hard core poverty at 8.6 percent (3.9 million people); in all cases poverty is higher in rural than urban areas. This indicates that the rural-urban wealth divide is real and will likely continue to catalyse rural-urban migration as Kenyans move to towns and cities in search of higher incomes.

Thirdly, the informal sector continues to employ most Kenyans and accounted for 83.4 per cent of total employment; this is down from about 89 percent last year. Informal employment tends to be of lower quality than formal employment in terms of wages, job security, and working conditions. Thus, the bulk of Kenyans continue to work in a sector is precarious and may very well negatively inform the quality of their lives.

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(source: https://www.standardmedia.co.ke/business/article/2001263519/foreign-investment-forecast-to-slow-down)

Finally, data on exports paints an interesting picture in that top export earners were tea, horticulture, articles of apparel and clothing accessories, coffee, and titanium ores and concentrates. Thus, Kenya’s exports continue to be dominated by agricultural products and products with limited value addition particularly given that manufacturing sector growth was very weak last year and grew at 0.2 percent.  Further, Africa remained the leading destination of Kenya’s exports, accounting for 37.7 percent of total exports in 2017, with East African Community (EAC) accounting for more than half of total exports to Africa. What this means is that Kenya’s exports mainly go to countries with low GDP per capita that informs spending power and aggregate demand. It is important that the country restructures exports such that they are more sophisticated and target countries with higher incomes so that exports become a stronger engine for job creation and income growth.

Anzetse Were is a development economist; anzetsew@gmail.com

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