Prioritize sector-investments, Kenya urged, after a surprise GDP rebase
Rebasing is a procedure where the national statistical authorities – in this case KNBS, ensure that national accounts statistics present an accurate reflection of an economy as possible. This is by replacing an old base year or economic prediction to come up with volume measures of GDP with a more recent base year. The process enables economic estimates to better account for the current structure of the economy and sectoral growth drivers and to better reflect the performance of the most important parts of the economy.
By Steve Umidha
The Government has been advised to reevaluate its priority list, just days after a review of national economic data – commonly known as rebasing, showed that the country’s 2019 GDP was actually higher than earlier valued.
As a result, economic experts now want policy makers sitting at the national Treasury and affiliate agencies to give more impetus to essential sectors seen likely to fuel the country’s economic recovery.
“You can see a hand of ICT in every other sector right now. And while other sectors are critical, to give policymakers something to work with in the long term, I think the government will need to also lay more focus on transport, real estate and manufacturing sectors,” commented Erick Musau – an investment analyst with Standard Investment Bank (SIB).
Mr. Musau, in a telephone interview further urged the State to ‘pick and choose’ such sectors of concentration while aligning its targets on the Vision 2030 whose successful delivery hinges on Public-Private Partnerships (PPPs).
“Going forward I believe PPPs model will be the solution to executing some of the key projects in the pipeline and whose abilities could greatly impact on the overall GDP,” he noted.
The latest update, according to figures by the Kenya National Bureau of Statistics (KNBS) saw a 34.7 percent drop in agriculture, forestry, and fishing – a key sector that declined by more than Sh1.2 trillion after the rebase exercise.
While the agricultural sector is still widely regarded as the backbone of the economy, contributing approximately 33 percent of Kenya’s Gross Domestic Product (GDP) – and employing more than 40 percent of the total population, recent revision found that the sector no longer represents a third of the economy even though it is still the biggest component after falling in the new structure to 20 percent from an average of 32 percent.
“The most notable change was in the contribution of agricultural activities to total GDP that shed 12.5 percentage points from a five-year average of 32.9 percent in the old series to 20.4 percent in the new series,” noted KNBS while releasing the revised figures.
It found that Kenya had indeed expanded by Sh515 billion than earlier projected after it was rebased to accommodate new sectors whose output had grown in recent years.
The rebasing indicated that the 2019 GDP in nominal terms or economic valuation had risen to Sh10.2 trillion up from Sh9.7 trillion, when such an exercise was undertaken in 2014, according to the National Economic Survey by KNBS.
Kenya rebased its economy in September 2014, revising the base year to 2009 from 2001 previously, which grew the GDP per capita from $994 to $1,256 and catapulted the country to middle-income status. The process ordinarily gives an accurate reflection of the structure and size of an economy.
This year’s is the seventh time Kenya’s economy has conducted the exercise, with previous ones being in 1957, 1967, 1976, 1985 and 2005.
Global financier, the IMF, a private investment arm of the World Bank while giving its conditions on the US$2.34 billion loan to Kenya, had suggested that the country make the exercise periodical after every five years.
Real estate, ICT, transport and storage, financial and insurance services, and manufacturing were higher – sectors that ironically remained vibrant when the pandemic hit.
The ICT sector for instance, contributed 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.
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