GDP growth not just numbers, it should make sense to Kenyans

[Photo: Courtesy]
A GDP growth of 6.3 per cent in 2018 -the highest since 2010 -has baffled many, including the Government itself. The Treasury had projected the economy would grow by 6.1 per cent.

For ordinary Kenyans however, there is no cause for celebration. If an additional Sh1.15 trillion that the economy generated in 2018 were to be shared among Kenyans, the joy in this country would be unrivaled.

But there is no joy at all.  If anything, financial reports by the Central Bank of Kenya, KNBS and Financial Sector Deepening (FSD) have revealed that for a majority of Kenyans, matters seem to have moved from bad to worse.

The 2019 FinAccess Household Survey found that most Kenyans increasingly experience difficulties meeting their day-to-day needs, with those polled saying they are less prepared to deal with emergencies such as diseases, and had little money to invest or save.

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Overall, according to the survey, the fraction of Kenyans who are financially healthy  – those able to set aside some cash for a rainy day and remain with little after spending on essentials  – declined from 39.4 per cent in 2016 to 21.7 per cent this year; a reflection of tough economic times. These are realities that were not captured by the 2019 Economic Survey, which also showed that cost of living for most Kenyans got better. Moreover, some economic indicators in 2018 painted a picture of an economy in which the private sector was not doing as well as the numbers indicated.

Whereas GDP at market prices grew faster from 4.9 per cent in 2017 to 6.3 per cent, taxes on goods and services produced during this period- and which had grown by 5.4 per cent in 2017- grew at a slower rate of 5.2 per cent, pointing to an under performance of the private sector.

The private sector- made up of firms and individuals- is the main taxpayer and when it is not doing well, Government revenues decline. The private sector’s performance in 2018 was so pathetic as to prompt the question: where did the growth come from?

A tough operating economic environment resulted in 18 firms that were profitable in 2017 plunging into losses; pushing up the number of loss-making firms in 2018 to 36 from 31 in 2017 according to an analysis of audited results for over 100 listed and non-listed companies by our sister publication, Financial Standard.

As President Uhuru Kenyatta put it in his 2017 State of Nation address, Kenyans can’t appreciate the GDP figures if they can’t put ugali on the table.That is the only way Kenyans will appreciate the figures flowing out of Herufi House.

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GDPCentral Bank of KenyaFinancial Sector