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Kenya Can … End Poverty

Posted by Unknown economy 11:49 AM

Kenya has proven particularly resilient to the global financial crisis: Its fiscal position is strong, the financial sector robust, the external sector in balance, and inflation below 10 percent.

The World Bank projected a GDP growth rate of 3.5 percent in Kenya for 2010.

In 2009, growth has been driven by services and construction (figure 1). Kenya’s service sector has been traditionally very strong and accounts for 55 percent of the economy. This year, growth in the service sector (+4.5%) was supported by a rebound in tourism (+28 percent) which experienced a record decline in 2008 (-36 percent). IT-based industries have also shown strong growth in phone connectivity (+35%) and internet access (+28 percent). Industry, which accounts for 17 percent of the economy, will grow by an estimated 3 percent, owing mostly to the booming construction sector (+13%).

Figure 1 – 2009 growth: Services perform strongly but agriculture contracts again

Source: KNBS and Bank Staff estimates (growth at factor costs)

Agriculture remains the Achilles’ heel of Kenya’s economy, both in terms of productivity and wealth distribution. In 2009, the sector is projected to contract again by 2.4 % after declining by 5 percent in 2008, despite record high commodity prices. The agriculture sector has not only been hit by domestic and external shocks but it is also the sector with some of the most difficult policy challenges.

At the end of 2009, the price of maize, Kenya’s main staple, was double the international price (figure 2), and for most of the year it was also substantially higher than in Uganda and Tanzania. Kenya’s high maize price policy benefits only a very small group – less than 2 percent of maize farmers, most of whom are large and influential producers. The rest of the population, particularly the urban and rural poor, pays a high price.

Figure 2 – Kenya’s maize prices increased while global prices declined