Kenya could reach a middle income status in the next four years if the current growth rates are sustained, a new study has shown.
The United Nations Economic Commission for Africa (UNECA) forecasts that Kenya’s annual gross national product (GDP) per person will be $1,030 (Sh88,000) in 2016 against the threshold of $1,000 (Sh85,400) per capita used to categorise economies as middle income.
The study brings closer the reality the Vision 2030 aspirations of making Kenya a middle income economy.
A key assumption of the study is that a growth rate of at least 4.5 per cent, the projected rate for this year, will be maintained for the next four years.
In 2011, Kenya’s real GDP per capita was $830.5 (Sh71,000), having risen from $526 (Sh45,000) in 2005.
Seychelles is the richest country in the wider eastern Africa region with per capita income of $11,183 followed by oil-rich South Sudan at $1,570 and Djibouti at $1,400.
Rwanda’s per capita is $600, Uganda’s $550, Tanzania’s $500 and Burundi’s $210. Ghana achieved a middle income status last year.
The head of the macroeconomic and social policy analysis cluster at the Addis Ababa- based UNECA, Andrew Mold, however said it could take up to 2026 for Kenya to achieve the status if annual growth rates slip to 1.5 per cent and 2.6 per cent, levels last seen in 2008 and 2009, respectively.
The study—Tracking Progress on Macroeconomic and Social Developments—in the Eastern Africa Region was launched in Nairobi last week.
Dr Mold said urbanisation would be the key driver of growth by reducing the cost of providing critical services per person.
Prof Michael Chege, an economic adviser at the Ministry of Planning, said the growth of the urban population was twice that of the general population.
“We must realise that it is easier for people to move to where the jobs are, but it is more difficult for investments to move to where the people are. So that means we must create jobs in the urban areas to absorb the rising population there,” said Prof Chege.
Dr Mold said that one way to ensure the benefits of growth accrue to a wider group of people would be to enforce minimum wages as had been done in Brazil, which is now among the top 10 economies by size globally.
“Enacting minimum wage legislation would be good for the country in order to share the benefits of growth,” said Dr Mold.
The report identifies external financing, higher dependence on foreign markets, risks from inflation and macroeconomic stability as some of the short-term constraints to achieving the middle-income status.
In the long-term unreliable agriculture production, poor infrastructure, technology gaps and low investments stand as the key hindrances to growth.
Dr Mold said investments needed to grow by 25 per cent annually, the threshold at which other countries achieved accelerated economic growth.
“There is need for concerted efforts for national innovation strategies,” said Dr Mold.
Prof Chege said emerging markets would be an important driver of growth in Kenya.
“We have to realise that India and China have enormous restrictions even as we seek them as new markets,” said Prof Chege.
Mr Dickson Khainga, an economist from the Kenya Institute of Public Policy Research and Analysis, said Kenya had been ranked fourth in terms of life satisfaction in eastern Africa, after Djibouti, Madagascar and Ethiopia, meaning better economic performance “was not necessarily concomitant with life satisfaction.”
“Satisfaction is higher in wealthier countries in the region, Ethiopia has a higher than expected level of satisfaction compared to Tanzania which has a higher per capita,” the report said. [email protected]
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