The size of Kenya’s economy is projected to reach the Sh10.1 trillion mark this year, the latest statistical estimates by the International Monetary Fund (IMF) have shown.
This will mark the largest absolute expansion in recent years, with the gross domestic product (GDP) estimated to rise by Sh1.1 trillion from Sh9 trillion in 2018.
In percentage terms, the growth this year is estimated at 5.83 percent, a slight decrease from 5.95 percent last year.
If the IMF projections hold out, Kenya’s economy could grow to Sh15.7 trillion in 2023.
The country expects to start commercial oil exports in 2022, a move that is expected to boost the GDP considerably.
A larger economy, coupled with strong growth in the coming years, means better prospects for expansion of jobs, labour earnings, investment opportunities and delivery of social services by the government.
Analysts say the government needs to entrench macroeconomic stability to maintain the growth momentum.
“We need low inflation, predictable interest rates and an environment of policy stability to attract private sector investment,” Robert Bunyi, an investment analyst, told the Business Daily.
“Any investment by the government has got to be facilitative of investments by the private sector.”
According to him, the major risks facing the country are rising public debt and high unemployment, especially among the youth.
Kenya’s net debt, which has sparked debate over its sustainability, is forecast to stand at Sh5.2 trillion this year compared to Sh4.6 trillion in 2018.
“Massive increases of public debt from where we are will have a negative impact in terms of taxes and interest rates,” Mr Bunyi said.
The forecast Sh10.1 trillion economy would raise the country’s GDP per capita (per person) by 9.2 per cent to Sh205,408 compared to last year’s Sh188,099.
Most of the growth will, however, be captured by the super-rich and individuals in high-paying professions in line with the country’s inequality trends.
Data from the Kenya National Bureau of Statistics (KNBS) shows that 1.9 million Kenyans, representing three-quarters of those working in the formal sector, earn a salary of below Sh50,000. Millions of others are unemployed and have unreliable income sources.
The government is under pressure to expand opportunities for its citizens whose numbers have swollen in recent years. The country’s population is projected to hit 49.3 million people this year, up from 48 million in 2018.
The population increase is currently running at more than one million people per year.
Kenya’s current economic growth momentum is being fuelled by massive investments by the government and the private sector amid a favourable macroeconomic environment featuring low inflation and controlled interest rates.
The government continues to invest heavily in energy and infrastructure projects, including roads and the Standard Gauge Railway (SGR).
A substantial part of private sector investment is being channelled into real estate.
Sectors that have recently done well include agriculture, construction and manufacturing.
There are, however, fears that there will be unseasonably low rainfall in this second quarter in what will hurt performance of the key agricultural sector and drive up food and utility costs.
IMF’s growth estimates are based on the current market prices using exchange rates prevailing between January 14 to February 11.
They are also reliant on several assumptions, such as that established policies of national authorities will be maintained and that the average price of oil will be $59.16 a barrel in 2019 and $59.02 a barrel in 2020 and will remain unchanged in real terms over the next few years.
Kenya’s economy is expected to remain dominant in the region, staying ahead of its rivals in terms of overall size and the welfare of the average citizen as expressed in GDP per capita.
Ethiopia’s GDP, which was previously tipped to overtake Kenya’s economy, is now projected to grow 7.7 per cent to $90.9 billion (Sh9 trillion) this year.
That of Uganda is expected to expand 6.2 per cent to $30.3 billion (Sh3 trillion).
Tanzania is estimated to register the lowest growth rate of 3.9 per cent to $61 billion (Sh6.1 trillion), interrupting its recent rapid expansion that has stood at more than six per cent per annum.