Kenya's GDP Growth Hits 5.6% in 2023, Expected to Moderate to 5.0% in 2024

Despite these challenges, Kenya's economic growth demonstrated resilience, bolstered by strategic government policy measures that enhanced overall macroeconomic stability.


Devdiscourse News Desk | Nairobi | Updated: 05-06-2024 13:50 IST | Created: 05-06-2024 13:50 IST
Kenya's GDP Growth Hits 5.6% in 2023, Expected to Moderate to 5.0% in 2024
The KEU projects an average GDP growth of 5.2% during 2024-2026, driven by favorable weather conditions for agriculture, recovery in industry, and resilience in the services sector.

Kenya's real GDP growth accelerated to 5.6% in 2023, surpassing the previous year's growth of 4.9%, according to the latest Kenya Economic Update (KEU) launched today. However, GDP growth is expected to slow to 5.0% in 2024. The 2023 growth was driven by a recovery in the agriculture sector, following improved weather conditions, and a robust performance in the services sector, with significant contributions from tourism and financial services.

The 29th edition of the Kenya Economic Update, titled "Fostering Trade for Robust Growth and Dynamic Job Creation," highlights several challenges framing Kenya's macroeconomic performance in 2023. These include tight fiscal and monetary policies, elevated inflation, rising debt service obligations, high borrowing costs limiting access to global capital markets, and the sharp depreciation of the shilling. Despite these challenges, Kenya's economic growth demonstrated resilience, bolstered by strategic government policy measures that enhanced overall macroeconomic stability.

"In a decisive move to stabilize the macroeconomic environment, the Government of Kenya successfully conducted a partial buyback of the Eurobond in February 2024, significantly easing immediate liquidity constraints and calming the markets," said Keith Hansen, World Bank Country Director for Kenya. "The improved macroeconomic conditions and renewed access to international financial markets are anticipated to boost investor confidence and private investment."

The KEU projects an average GDP growth of 5.2% during 2024-2026, driven by favorable weather conditions for agriculture, recovery in industry, and resilience in the services sector. The positive outlook assumes adequate rainfall, adherence to fiscal consolidation, and continued implementation of structural reforms. The report emphasizes that the private sector will play a crucial role in Kenya's medium-term economic recovery.

Kenya's efforts in trade integration are highlighted as a significant contributor to economic growth and job creation. The report notes that agriculture remains the largest contributor to Kenya's exports, followed by minerals and chemicals. However, Kenya's exports have underperformed, lacking diversification and losing competitiveness in existing markets.

The KEU underscores Kenya's proactive utilization of global, continental, and regional channels to enhance its role in the global economy and increase trade integration. These efforts aim not only at export growth but also at converting this growth into job opportunities.

"Even though the export-to-GDP ratio has been declining, the potential for export expansion remains significant," said Naomi Mathenge, World Bank Senior Economist for Kenya. "Targeted policy considerations are crucial to fully capitalize on economic growth and robust job creation from trade integration."

Key policy considerations include revising trade and investment policies to foster export orientation, ensuring policy coherence and predictability, strengthening institutions, enhancing strategic skills development, providing multifaceted support to export orientation, and attracting more Foreign Direct Investment. Additionally, Kenya will need to address trade and climate-related vulnerabilities, particularly for agricultural exports.

 
 
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