Kenya’s economy returns 2.6 per cent jobless growth

Kenya’s economy grew more strongly than expected last year, helped by a recovery in tourism, construction and telecommunication but poor performance in key agriculture sector pulled back the pace of activity hurting jobs growth across all sectors.

Planning minister Wycliffe Oparanya said the rebound from the deep plunge the previous year should accelerate to a rate of more than 4 per cent this year helped by strong growth in the agriculture that has benefitted from heavy rains, the ongoing recovery in the United States and Europe and buoyant growth in large Asian economies such as China.

The economy grew by 2.6 per cent from a revised figure of 1.6 per cent in 2008 above the initial estimate of 2.2 per cent, according to Economic Survey 2010 whose results Mr Oparanya released on Thursday.

“Performance was constrained by un-favourable weather conditions, the global financial recession and a slugging internal and external demand,” said Mr Oparanya.

The 2010 survey shows that key sectors of the economy contracted by large margins slowing down overall growth.

Agriculture, which accounts for at least a quarter of Kenya’s Gross Domestic Product (GDP), declined by 2.6 per cent while mining and electricity slumped by 4.2 and 3.1 per cent respectively.

Trends were similar in the wholesale and retail segments where growth slowed down to 1.5 per cent from 4.8 per cent in 2008.

Analysts said the 2009 outcome leaves a tough assignment in the hands of Finance minister Uhuru Kenyatta, who will have to craft the right policy mix and a budget that will accelerate growth and spur the economy’s ability to create jobs higher last year’s pace.

Unemployment among the youth remains one of Kenya’s top policy headaches to which the government has responded with successive step gap measures such as revolving funds and Kazi kwa Vijana to help stem a looming social upheaval.

To claw back some of the ground the economy has lost in the past two years, Mr Kenyatta will have to craft a financing and policy mix that can accelerate growth to the desired rate of 5 per cent, uplift declining sectors and create jobs.

Stemming mass unemployment might force Mr Kenyatta to consider enhancing the stimulus package programme he started last year in an environment where government revenues are way below targets even as demand for higher public spending continues to rise from many sectors of the economy.

Revelations that the economy is not out of the woods yet represents yet another setback in Kenya’s ambition to enter the league of economies that are growing at double digit levels.

Analysts however maintained a positive outlook pointing to strong signs of recovery in key sectors such tourism, financial services and a buildup of consumer confidence.

“Conditions are ripe for a possible return to the pace of economic activity that culminated to the 7.1 per cent growth in 2007,” said Einstein Kihanda, the head of fund management at Sanlam Investment Management.