Data revision to increase Kenya’s economy by a fifth

What you need to know:

In 2012 Kenya’s GDP was put at Sh3.44 trillion but this could rise by Sh688 billion to Sh4.128 trillion once the underestimation is corrected.
Razia Khan, head of research on Africa at StanChart Plc said the revision would likely improve key credit metrics such as the average per-capita income, the fiscal and current account deficits when measured as a percentage of GDP, as well as public debt ratios.
Kenya’s government revenue, as a proportion of GDP, has remained at between 23 and 25 per cent compared to below 20 per cent for sub-Sahara Africa.

The size of Kenya’s economy could increase by up to a fifth this year after the scheduled revision of data is completed, research by Standard Chartered Bank Plc indicates.

In 2012 Kenya’s GDP was put at Sh3.44 trillion but this could rise by Sh688 billion to Sh4.128 trillion once the underestimation is corrected.

“Near-term, attention will focus on the routine rebasing of Kenyan GDP statistics. Official growth figures are at odds with other evidence, suggesting some underestimation of economic activity over time,” said Razia Khan, head of research on Africa at StanChart Plc.

Revised up

In a report titled ‘‘Kenya: Big Data Changes’’, Ms Khan said that the revision is most likely to be out by June this year.

“It is plausible that Kenya’s GDP will be revised up by circa 20 per cent with updated survey data, most likely in Q2-2014,” said Ms Khan.

She said the revision would likely improve key credit metrics such as the average per-capita income, the fiscal and current account deficits when measured as a percentage of GDP, as well as public debt ratios.

“An upward revision to GDP would help explain Kenya’s more favourable revenue mobilisation ratios compared with most of its peers, although this also reflects Kenya’s better-established private sector,” she said.

Kenya’s government revenue, as a proportion of GDP, has remained at between 23 and 25 per cent compared to below 20 per cent for sub-Sahara Africa.

Experts believe Kenya’s large informal sector is not accurately captured in national accounts, explaining why some sectors such as real estate occasionally grow by double digits.

Other indicators that the real data may be different from official reports are poverty levels, with the World Bank estimating recently that it stands at about 40 per cent, down from 47 per cent in 2006 and 56 per cent in 1999.

Standard Chartered says economic growth is likely to be accelerated by financial inclusion standing at 75 per cent of the people above age 18. In South Africa the inclusion is at 73 per cent.

“Roughly one-third of adult Kenyans have access to formal banking. Another one-third have financial access via mobile money, resulting in the lowest proportion of the financially excluded in SSA, less than 25 per cent,” said Ms Khan.