The report acknowledges that since 2005, services exports in Kenya have accounted for over 50% of the increase in total exports.
World Bank Group has said that Kenya has for the past decade experienced economic growth attributed to modern services such as financial intermediation and mobile communications.
According to the Kenya Country Economic Memorandum (CEM) titled: ‘From Economic Growth to Jobs and Shared Prosperity’, the expansion in these services have stirred demand for other services such as trade.
The report acknowledges that since 2005, services exports in Kenya have accounted for over 50% of the increase in total exports. Further, the report notes that service exports including Trade, transport, ICT and financial services could overtake goods exports.
CEM highlights Kenya’s incorporation of the private sector as the major driver for this growth.
“Unlike most of its African peers, the country embraced the role of the private sector from the start. One major accomplishment and often under-appreciated aspect of the country’s growth story is that Kenya has lived within its means. The country has never sought or received debt relief, but has opted for better economic policy - raising revenues, liberalizing trade and the forex market,” the report which was released on March 8, 2016, says.
Despite the commendable growth, Kenya needs to tackle some glaring issues that are holding it back from experiencing rapid economic growth.
World Bank Group (WBG) states that the country’s agriculture’s share in GDP declined from 26.5% in 2006 to 22.0% in 2014.
For the Eastern Africa nation to reduce poverty levels, it needs to address agriculture challenges head on.
“Reviving agriculture remains Kenya’s main pathway to poverty reduction,” Diarietou Gaye, World Bank Country Director for Kenya says.
The manufacturing industry in the period under review stagnated at 11.8% of GDP. This sector also plays a major role in developing the nation and as such should be revived. This industry will help address unemployment, attract foreign investment as well as boost the country’s economy through export of products.
Gaye notes that the “the real gains come from increasing productivity in the Jua Kali (informal) sector”
“Accelerating growth to meet Kenya’s development goals requires technological advances and innovation that raise firms’ productivity,” the Country Director says adding that firms should invest in research and development (R&D). He also calls on Kenya to leverage its stock of managerial capacity to increase innovation.
“At the same time, attracting foreign firms can stimulate productivity enhancement as technologies spill over to domestic firms,” he says.
To achieve rapid growth, Kenya will need macroeconomic stability to boost investment and savings, the report argues.
“To accelerate short-term growth, the current savings rate needs to be doubled, primarily by mobilizing domestic savings,” says Apurva Sanghi, World Bank Lead Economist and Program Leader for Kenya.
Although World Bank acknowledges the government’s efforts to build Kenya’s energy and transport infrastructure, WBG advises that there is a need for these efforts to be complemented with improvements in the public investment management process and better execution.
The discovery of oil in Kenya’s northern region is a potential platform to further grow the nation. If used prudently, the Kenya’s recent oil discoveries, the report says can contribute to achieving the Vision 2030 goals. To ensure that this discovery benefits the country, functioning institutions are of essence.
CEM identifies three long-term growth drivers: Innovation, Oil, and Urbanization. “But, underpinning these recommendations is one overarching theme; that of functioning institutions,” says Sanghi.
“Resource extraction can make a direct contribution to economic output and the main transmission channel will be fiscal. So appropriate management of resource revenues can generate resources that could be used to raise public investment, human capital, and productivity in the non-resource sectors of the economy,” part of the report reads.
Image Crct: Bloomberg
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