Kenya’s economic growth has not been all inclusive, relied on the service sector and fell behind peers, a new World Bank report notes.
The report — the Kenya Country Economic Memorandum: From Economic Growth to Jobs and Shared Prosperity— looks at Kenya’s present economic model and projects how this will perform in the future.
It outlines the key drivers for growth while noting the country’s major setbacks.
The report points out that the country has created few jobs, has had unfavourable labour market regulations and a business environment that favours the informal sector, pushing many away from the formal sector in the long run.
“If the Kenyan economy had grown as fast as its peers in sub-Saharan Africa over the past decade by 2014, the average Kenyan’s income would have been 15 per cent higher.
“If the economy had matched the growth of the Asia peers, then Kenya’s income per capita would have been 54 per cent higher, “the report pointed out.
Agriculture and manufacturing are said to be stagnating while the service sector has grown, now overtaking the country’s product exports.
World Bank lead economist and program leader for Kenya Apurva Sanghi said the economic dynamics challenges the Vision 2030 targets, with a double-digit gross domestic product remaining hard to attain.
“Kenya’s GDP has exceeded the 7 per cent mark only four times since independence and the short-run growth that drove the figures to the 8.4 per cent in 2010 was largely driven by high savings.
“The savings, which drove investments, has now fallen low and lagged. The country has to boost savings by improving the micro fiscal environment, reform pension system and recognise the role of SACCOs."
Innovation, oil and urbanisation were identified as the key potential drivers for Kenya’s future economic growth.
The discovery of oil was lauded as well-timed since Kenya’s economy is already diversified but its volumes and location was cited as a drawback.