Revised figures to increase size of Kenya’s economy

Economists predict Kenya’s Gross Domestic Product (GDP) in 2013 could hit 20 per cent under the revised system recently adopted by the Kenya National Bureau of Statistics (KNBS).

“The provisional indications are that the revision will be around 20 per cent, increasing GDP in 2013 to $53 billion from the current estimated level of $44.1billion in 2013,” said David Cowan, Chief Economist for Africa at Citibank.

KNBS is currently engaged in a major revision of the GDP data. International best practice indicates that the base years used in GDP calculations should be updated every five years. Kenya’s was last updated in 2001, while the revised data now moves the base year to 2009.

He made these remarks during a Public Sector Treasury and Finance conference, hosted by Citibank at the Windsor Golf Hotel.

 The theme of the conference is ‘Efficiency reform and optimisation of financing solution channels”.  This is the second conference following a successful Public Sector conference held in 2008 whose focus was on “Mobile Financial services”.

Cowan, who is an expert on Africa Economies, discussed the macro-economic aspects specifically highlighting the Kenya growth story.

Shilling sell-off

KNBS is also working with International Monetary Fund on revising its balance of payments data. In particular, the large short-term capital flows item will be reduced effectively, being re-classified as flows in the current account. There is probably a combination of increased remittances and re-exports. The outcome of this will be twofold.

“First, with the GDP revision the fiscal deficit will be lower. Second, the current account deficit will be even lower as it will be influenced by its own revisions and the changes to GDP,” said Cowan.

“While this may appear purely a statistical adjustment, it does help explain why we have not seen greater Kenyan shilling weakness, despite the large twin deficits since 2008. This is apart from the delayed monetary policy response in 2011, which drove the sharp Kenya shilling sell-off before it rebounded,” he added.

After the significant economic slowdown in 2008-09, Kenya’s economic growth has been up but still considered weak especially in the 2010-12 period.

Real GDP growth averaged 6.4 per cent in the three years from 2005-07 at the height of the economic boom, but only 4.9per cent in the three years from 2010-12.

While there was a broad consensus that there would be a relatively quick rebound after the successful holding of the March 2013 elections under the new constitution, the rebound to date has been weaker than expected.

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