Job creation

My thoughts on the Kenya 2016 Economic Survey and interview panel on the same

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This article first appeared in my weekly column with the Business Daily on May 8, 2016

The Kenya National Bureau of Statistics (KNBS) released the Economic Survey 2016 which provided interesting insights on the state of the Kenyan economy. GDP growth stood at 5.6 per cent in 2015 compared to a 5.3 per cent growth in 2014. An important development indicator to note in Kenya however is that GDP per capita (a measure of average income per person in a country) has not moved very much marginally increasing to KES 91,588 in 2015 from KES 89,240.5 in 2014. This is because although the economy is growing, so is the population. Such robust population growth in which almost a million births were recorded last year, translates to a dilution of the ability of economic growth to significantly reduce poverty levels.

Inflation stood at an average of 6.6 percent, within the CBK preferred range of 5 percent +/- 2.5 percent. It appears that monetary policy action by the CBK which consisted of several actions such as increasing the Central Bank Rate (CBR) from 8.5 per cent to 10.0 per cent in June 2015, and further to 11.5 per cent in July 2015, managed inflation.  Interestingly however, despite the CBK interest rate hikes and a general feeling that credit is expensive in Kenya, domestic credit grew by 19.2 per cent and credit to the private sector expanded by 17.5 per cent in the 2015. Back to monetary policy, this was particularly important last year which saw the KES dip in value to the USD. This depreciation was due to internal and external factors and probably negatively informed growth as Kenya is an import economy and such depreciation created upward inflationary pressure. However the lower cost of Kenya’s biggest import, petroleum, ameliorated the inflation dynamic as oil prices fell to USD 52.53 per barrel, down from an average of USD 99.45 per barrel in 2014, which allowed government to spend KES 215 billion in 2015, down from KES 293 billion in 2014.


Agriculture continued to be the strongest contributor to GDP at 30 percent followed by manufacturing at 10.3 percent. An important note about agriculture is that the report states the weather system El Nino as a positive contributor to agriculture leading good rains and an improvement in agriculture outputs. However a point of concern is that tea production fell by 10.3 percent and coffee by 16 percent, both of which are important exports and forex earners. Although both still earned a bit more than they did in 2014, it is important that any further deterioration in the performance of these commodities is stemmed. This is because of the continued poor performance in the tourism sector, another important forex earner, where tourism earnings fell 2.9 percent from KES 87.1 billion in 2014 to KES 84.6 billion in 2015. In short, the figures seem to indicate that forex revenue generation was difficult last year. Poor performance by forex earners has numerous fiscal implications such as negatively informing government’s ability to service foreign denominated debt affordably.

In terms of manufacturing, growth remained fairly constant growing a fraction from 10 percent in 2014 to 10.3 percent in 2015. This marginal increase is attributed to reduced cost of inputs such as petroleum products and electricity. However, on-going constraints such as the high cost of credit and cheap imports continue to negatively affect the sector.

Job creation grew by 5.6 percent and an on-going trend was confirmed in that the vast majority of jobs were created in the informal sector. Informal sector employment rose by 6.0 per cent to 12.6 million persons, with a share of 82.8 per cent of total persons engaged in employment. Clearly the informal sector continues to grow and be an important job creator for Kenyans. This should provide impetus for efforts to be directed at this sector to make it more productive in a manner that alleviates poverty.


Overall, efforts need to continue to increase productivity and outputs in agriculture and manufacturing (particularly the latter), the poor performance of forex earners ought to be analysed and addressed, and the informal sector has to feature front and centre in terms of efforts to improve the performance of private sector.

Below is an interview panel in which I participated on Citizen TV last week commenting on the Economic Survey 2016:

Anzetse Were is a development economist; email: