Size of Kenyan economy shrinks to Sh2.8 trillion in new calculations

NAIROBI: Kenya’s economy as measured in terms of Gross Domestic Product (GDP) could be much lower than current estimate of Sh3.4 trillion.

According to new calculation that uses 2009 as the base year when calculating GDP, the economy is now valued at Sh2.7738 trillion in 2013. This means that the country’s economy was overrated by a massive Sh600 billion.

This latest calculation is based on the new calculations that use 2009 as the base year when calculating GDP, using a methodology that is set to be released in September this year by the Kenya National Bureau of Statistics (KNBS).

This figure is 20.6 per cent bigger than the Sh2.365,430 million GDP size that was recorded in 2009 under the revised base year.

It is also slightly lower than the Sh3.4 trillion recorded in 2012, before using the new calculation method being put in place by the national data office. It is still unclear at what pace Kenya’s economy, considered East Africa’s largest, will grow this year. This is after the Government failed to provide the forecast figures in the 2014 Economic Survey Report, recently launched by the Devolution and Planning Cabinet Secretary Anne Waiguru.

 Kenya’s economy grew by 4.7 per cent in 2013 from 4.6 per cent the previous year, a pace slower than that of neighbouring Uganda at 5.6 per cent and Tanzania at seven per cent and Rwanda at 7.5 per cent.

CONSUMER BASKET

When all the calculations are complete, Kenya’s new debased GDP figures are expected to be officially released. The basket of goods that comprise the consumer basket is also expected to change with transport separated from communication, wholesale and trade removed all together and room created for new sectors such as oil and mining.

The role of manufacturing, telecoms and services has gained more prominence with mining sector making a grand entry. Currently the KNBS data is hinged on figures from 2001, which will now be rebased to a new reference point of 2009 to present an accurate reflection of Kenya’s economy. “What we are doing now is accounting for the fact that since then there are certain industries that have grown such as mobile telecommunications and certain structures of the economy have changed,” said Kwame Owino, Chief Executive- Institute of Economic Affairs (IEA).

Opinion is still divided among economics on whether the GDP figures will expand or shrink when the new calculations are launched.

“I don’t believe there is any economy in the world can grow at this pace. The fact of the matter is that our economy is not growing. That is just the politics of statistics,” said Dr Thomas Kibua, a former deputy Governor of the Central bank and currently a senior Economist at the African Development and Economic Consultants.

 “Whatever way you look at the figures I don’t think the economy can grow by more than five per cent.”

The National Treasury, however, clarified saying that it still maintains its growth forecast of 5.8 per cent for this year (2014) though the growth would be rebased on a high Gross Domestic Product figure.