This week, the World Bank launched its second Kenya Economic Update. We have been positively surprised to see such a strong uptake of our previous report and were pleased to have a full house at the launch and informal briefings we have in the run-up of the launch. These Economic Updates aim to replicate a model of shorter, crisper and more frequent country economic reports, which have become a trademark of the World Bank’s analytical presence in other countries, in particular China and Russia.
Kenya has a large number of strengths on which such an analytical program can built, including a strong private sector, a vibrant civil society, an open media, and a rise in new communication tools which are taking root very quickly.Our experience thus far confirms the value of embracing 21st century communication methods for the World Bank’s analysis. I thank Shanta for having taken the lead to establish a vibrant platform for knowledge exchange on Africa’s development on this site.
This Kenya Economic Update has three main messages. First, after two years of low growth, Kenya is back. The economy is now on its path of full recovery. We have upgraded our growth projection for 2010 from 3.5 to of 4.0 percent, and believe that in 2011, Kenya can grow at 4.9 percent. In both years, Kenya would grow in line with the average of Sub-Saharan Africa. This outlook is contingent on the absence of domestic shocks which in the past have often disappointed Kenya’s high hopes for strong economic performance (figure 1).
Figure 1 – Kenya’s economy is recovering, slowly but surely
Second, Kenya is running on one engine. Kenya’s weak engine remains its exports which have been declining sharply in relative importance. At independence, exports represented 40 percent of GDP. By the mid-1980s, the export share had dropped to 20 percent, before it recovered to 27 percent today. The manufacturing sector illustrates Kenya’s economic challenges. Stagnating at around 11 percent of the economy, the sector has dropped from second to fourth place in economic importance over the last decade. While tradable sectors, such as agriculture and manufacturing, have performed poorly, non-tradable sectors, such as services and construction, have been doing very well. In 2004, Transport & telecommunication became Kenya’s second largest sector; in 2007, wholesale and retail trade surpassed manufacturing as a percentage of GDP (figure 2).
Figure 2 – Manufacturing falls behind service sectors
Third, the Infrastructure deficit constrains exports. The port of Mombasa is the special focus of our report. It is probably East Africa’s the most important infrastructure asset, and a prime example for Kenya’s infrastructure deficit. Despite some improvements, port reforms have not kept up with the momentum in other African countries. It still takes 20 days to bring a container from Mombasa to Nairobi. This is longer than to ship the same container from Singapore to Mombasa (figure 3). However, the overall volumes handled in Mombasa are low by international standards, only representing 2 percent of the volumes handled by Singapore. However, the port in Singapore is not 50m times larger as in Mombasa but it has much more Throughput per infrastructure unit. It is in these “soft areas” where the port of Mombasa could make the biggest gains. These include the establishment of a “landlord port” and the enabling of full 24-hour port operations.
Figure 3 – it still takes 20 days to bring a container from Mombasa to Nairobi
We look forward to your feedback on our recent report and to suggestions on how to use World Bank analysis to support all Kenyans who want to improve the economic management of their country.