Economic revival seen in 2010 as agriculture picks up

The growth was mainly a result of private consumption and investment.

Food output

The government, for example, increased its investment by 31 per cent in 2008 and this is expected to generate growth in coming years.

The report calls for increased food output and agricultural productivity to support macroeconomic stability instead of relying on traditional monetary policy alone to manage inflation.

However, Kenya still has one of the lowest investment rates among its peers, having underperformed in attracting foreign direct investment (FDI).

Indeed, in terms of FDI, it has not regained its regional leadership, which it lost in the 1990s.

Key challenges to improving the investment climate, said the report, are insecurity, corruption, poor infrastructure, low investment confidence due to intermittent commitment to reforms, and limited access to credit by small and medium enterprises.

It noted that the flow of remittances has been increasing over time and official data showed it stood at about Sh42.5 billion (or $611 million) in 2008. It is, however, widely estimated that it was more than $1billion if informal remittance channels are taken into account.

The report says that there are several options to encourage remittances and exploit its potential, which include finding ways to redirect them through formal systems by enhancing affordability, improved reporting, cellphone transfers and even issuance of diaspora bonds.

The dependency ratio in Kenya is a key hindrance to growth and development as it stands above that of comparable countries like Ghana, meaning that there are many more people depending for their livelihoods on those with more income.

Another obstacle to development was the high birth rate at a time when economic growth is limited.

While the birth rate dropped from 8.1 children in the 1970s, it stood at 4.7 in the 1990s but rose to 4.8 by 2003.

This has led to a situation in which the number of young people joining the labour market rises by three per cent every year and yet there is no comparable growth in job opportunities.