Business
Kenya becomes a middle income nation – now 9th largest economy in Africa
Kenya’s gross domestic product was estimated to be 25 percent bigger after the authorities changed the base calculation year to 2009 from 2001, sending the east African nation into the continent’s top 10 economies.
The country’s economic output was calculated to be US$53.4 billion in 2013 after the rebasing, up from US$42.6 billion, the Cabinet Secretary for Devolution and Planning, Anne Waiguru, told a news conference on Tuesday.
That takes Kenya up to ninth in Africa’s GDP rankings from 12th, above Ghana, Tunisia and Ethiopia but below oil-producing Sudan based on a World Bank table for 2013.
The rebasing exercise means debt levels fall as a proportion of GDP, a closely watched ratio, and could give the Kenyatta administration some leeway for more borrowing to help finance its plans to build new transport links and repair infrastructure.
But revising the estimated size of GDP does not change Kenya’s ability to repay additional loans nor does it mean it has more income to spend on development. It provides the country a little bit of breathing space and “not an opportunity to open the cash register,” said public policy and economic analyst Robert Shaw.
As with other rebasings in Africa, the move takes into account structural and other economic changes, such as new technology, and updates the base year for prices.
Kenya’s GDP revision follows the rebasing earlier this year of Nigeria’s economy when it changed the base year from 1990 to 2010 and, as a result, vaulted above South Africa to become Africa’s biggest economy.
Changes in assessing agriculture, manufacturing and real estate accounted for most of the GDP rise. Technology and related fields are now treated as a standalone sector, taking into account a vibrant industry in Kenya, which has pioneered mobile telephone payments systems and exported the idea across Africa and beyond. The economy could also get a further boost in a few years when commercial oil production is expected to start.
With the rebasing, economic growth was revised to 5.7 percent in 2013, up from the previous estimate of 4.7 percent, a figure that had been below expectations and was partly blamed on a spate of Islamic militant attacks and a decline in tourism.
“The new numbers are credible and they constitute an important improvement in the economic and statistical knowledge base for Kenya,” Diariétou Gaye, the World Bank’s country director for Kenya, said, adding that a World Bank team joined other experts conducting a peer review of the rebasing exercise.
Based on a debt figure of 2.4 billion shillings (US$26.9 million) released in August after Kenya’s heavily oversubscribed, maiden Eurobond, the debt-to-GDP ratio falls to about 50 percent from 57 percent previously, according to a Reuters calculation.
With a population of about 44 million people, the new GDP figure implies economic output per capita stands at more than US$1,200. That would push Kenya into the bracket of middle income states, which according to the World Bank is within the US$1,045 to US$12,746 band.
A higher income ranking means it might not benefit from some aid designed for the poorest countries, economists say. Conversely, investors may be more attracted to a nation with a population that has more cash to spend, although many investors have already factored that into their calculations.
The kind of investment flow already attracted by Kenya, implies that investors already treated it as a middle income country.
Source: Reuters