Kenya reviewed the structure of its economy by including new economic activities, a situation that saw other sectors eat into the contribution of agriculture.
Technically known as rebasing, the exercise is aimed at recalibrating how the country’s Gross Domestic Product (GDP), or the size of the national cake, is computed.
Besides adding or subtracting new economic activities by using a new base year as the reference period for calculating GDP, rebasing also involves adopting new compilation methods as well as new or improved data.
After rebasing the economy, nominal GDP, which had not been adjusted for the increase in prices in 2019, swelled by around Sh520 billion to Sh10.26 trillion, up from the initial Sh9.74 trillion.
“The revised and rebased national accounts has resulted in an increase in the size of GDP, increase in per-capita income, change in the production structure and revised GDP growth rates among other changes,” said Kenya National Bureau of Statistics (KNBS) Director-General Macdonald Obudho yesterday following the release of the Economic Survey 2021.
Nominal GDP for 2020 was estimated at Sh10.75 trillion after the exercise.
However, the contribution of agriculture - for long known as the backbone of Kenya’s economy - shrank from a high of 34.1 per cent in 2019’s Economic Survey to 21.2 per cent as some of the activities were removed.
This as the contribution of real estate, ICT, transport and storage, financial and insurance services, and manufacturing went up.
The highest gainers were ICT, whose contribution more than doubled from 1.2 per cent to 2.5 per cent; real estate from 6.9 per cent to 9.2 per cent; transport and storage from 8.5 per cent to 11.7 per cent and financial services from six per cent to 6.4 per cent.
However, the contribution of education was flat at 4.2 per cent, while that of mining and quarrying dropped from 0.8 per cent to 0.7 per cent.
KNBS initiated the process of revising and rebasing the national accounts in 2017.
This is the seventh time that Kenya has rebased its economy, the last one having been done in 2014.
“The revision process entailed taking stock of the available data and assessing their suitability; formulation of a data collection strategy to fill the gaps; conducting various surveys and censuses; analysing and validating the data; compilation of revised and rebased estimates and a consultative review of the revised estimates,” said Ukur Yatani when he unveiled the Economic Survey 2021.
Some of the key data that informed the revision and rebasing included the 2017 Census of Industrial Production, the 2017 Integrated Survey of Services, the 2015/16 Kenya Integrated Household Survey, the 2019 Kenya Population and Housing Census and the 2016 Micro, Small and Medium Enterprises Survey, as well as a number of improved data from administrative records.
The rebasing of the economy comes at a time when the National Treasury is set to abandon the current Sh9 trillion legal ceiling of debt issuance and revert to one that is pegged on GDP.
Currently, the percentage of debt to GDP is estimated at 71.6 per cent, which has left the country with very little wiggle room to increase its borrowing. This was revealed by the International Monetary Fund (IMF) in one of its first reviews of the Extended Fund Facility and Extended Credit Facility, a Sh256 billion credit facility programme.
The IMF said Kenyan authorities had proposed an amendment to the Public Finance Management Regulations to replace the current nominal legal ceiling on debt issuance currently capped at Sh9 trillion.
Instead, they want to replace it with a medium-term debt-to-GDP anchor of 55 per cent of GDP in present value terms, discounting for low interest.
“Staff welcomes the new anchor and introduction of an accountability requirement — whereby the government explains to Parliament how planned policies would bring the debt ratio from current to targeted levels,” said IMF.