Kenya's gross domestic product (GDP) expanded by 5.6 per cent in 2010 compared to a growth of 2.6 percent in 2009 as all sectors driving the Kenyan economy recorded positive growths of varying magnitudes registering a growth of 6.3 percent in 2010 compared to contractions of 4.1 and 2.6 per cent experienced in 2008 and 2009 respectively, the minister for National Planning and Vision 2030 Wycliffe Oparanya has said.
Improved weather conditions, low inflationary pressure, low interest rates, stable macroeconomic environment, increased credit to the private sector and higher investments influenced growth in 2010 said Oparanya during the launch of Economic Survey 2011 report.
The minister attributed the turnaround was primarily to favorable weather conditions that prevailed in 2010, government intervention through supply of subsidized seeds and fertilizers; improved prices for some key agricultural exports such as tea and coffee, maize, wheat, rice, tea, sisal and pyrethrum were among the agricultural commodities whose production improved significantly.
The rising global demand resulted in improved prices of tea, coffee, sisal, pyrethrum and tobacco among other crops.
The favorable weather resulted in increased production of livestock and livestock products leading to rise in volume of milk deliveries by 26.9 per cent from 406.5 million litres in 2009 to 515.7 million litres in 2010 lower consumer prices of livestock products.
According to the report manufacturing sector grew by 4.4 per cent in 2010 compared to a marginal growth of 1.3 percent in 2009. This growth is mainly attributed to reliable power supplies arising from favorable weather conditions that bolstered electric power generation favorable tax policies, including the removal of duty on capital equipments and some raw materials, increased credit to the manufacturing sector and increased availability of raw agricultural materials.
The recovery in the global economy positively impacted on the Export processing Zones (EPZ) programmes recording an increase of KSh 5.5 billion in turnover to Ksh 31.7 billion in 2010.
Investments in the EPZ attracted an additional KSh 1.3 billion in 2010 the financial intermediaries’ - the sector posted a more robust expansion of 8.8 percent in 2010 compared to 4.6 per cent in 2009.
The Central Bank Rate (CBR) was lowered twice in 2010, with a view of lowering the cost of credit. Banks lowered their interest rates, which in turn benefited the private sector through access to
cheaper credit. However the spread of the deposit and lending rates remains relatively high at 12.4 percent in 2010.
Overall domestic credit grew by 30.4 percent from KSh 978.3 billion in 2009 to KSh1.3 trillion in December 2010. This growth was well above the targeted growth of 19.9 per cent.
Contributing to this growth were 21.2 per cent increase in credit to private sector including quasi government bodies and 62.3 per cent increase in domestic credit to central Government.
The Nairobi Stock Exchange(NSE) 20 share index rose steadily over the first three quarters of 2010 to reach a peak of 4,630 points during the third quarter. The index edged downwards slightly in the fourth
quarter but remained relatively high at 4,433 points at the end of December 2010 compared to 3,247 points in December 2009.
Additionally the survey says inflation was contained within the Government’s target of 5.0 per cent in 2010. The average annual inflation was 4.1 percent in 2010 down from a high of 10.5 percent recorded in 2009. The decline in the inflation rate was mainly on account of favorable weather which led to low food prices emanating from improved agricultural production, competition between the mobile telephone operators which resulted in reduction in calling rates,tourism earnings, which are a key source of foreign exchange earnings, rose by 17.9 per cent to KSh 73.7 billion in 2010 from KSh 62.5 billion in 2009
Volume of international arrivals grew by 8.0 per cent from 1.49 million visitors in 2009 to 1.61 million in 2010. Factors that contributed to the growth of tourism include promotion in new markets, example, Asia repositioning the country as a high value destination such as Brand Kenya Initiative, political stability, improved security and infrastructure. The sector recorded a slowed growth of 4.5 percent in 2010 compared to growth of 12.4 per cent in 2009.
In 2010/11, a total of KSh 91.0 billion was allocated to the road subsector by the Government compared to KSh 68.1 billion in 2009/10. Loans and advances from commercial banks to the construction sector grew by 7.3 per cent from Ksh 30.4 billion in 2009 to KSh 32.6 billion in 2010.
Cement consumption went up by 16.2 per cent to 3.1million tonnes in 2010 compared to 2.7 million tonnes in 2009. Total value of reported private building works completed in selected main towns went up significantly from KSh 21.8 billion in 2009 to Ksh 37.3 billion in 2010.
During the fiscal year 2010/11, the Government adopted a policy geared towards; consolidating economic recovery putting the economy back on the Vision 2030 growth path containing the risk of recessionary effects of multiple shocks encountered in the preceding years.
In 2010/11, overall Government expenditure is expected to stand at KSh 998.3 billion compared to KSh 805.3 billion in 2009/10. Total budgeted recurrent expenditure is projected to increase from KSh 620.5 billion in Public Finance 2009/10 to KSh 691.6 billion in 2010/1.
Development expenditure is also expected to increase from KSh 184.8 billion in 2009/10 to KSh 306.7 billion in 2010/11. The stock of Central Government outstanding public debt increased by 19.5 per cent from 889.9 billion in June 2009 to KSh 1.1 trillion in June 2010. Domestic debt stood at KSh 534.5 billion and accounted for 50.2 per cent of the total debt. External debt stood at KSh 528.9 billion. Ratio of total debt to GDP stands at 42.3 per cent in 2010 compared to 37.6 per cent in 2009.
The annual average price of oil increased to US$ 79.16 per barrel in 2010 compared to US $ 62.65 per barrel in 2009. The high international oil prices translated to higher petroleum prices in the domestic market. Total demand of petroleum products grew by 4.3 per cent from 3,610.8 thousand tonnes in 2009 to 3,760.7 thousand tonnes in 2010.
Installed capacity expanded by 7.7 per cent to 1,412.2 MW in 2010 from 1,311.5 MW in 2009. Consequently total electricity generation increased by 7.2 per cent to 6,975.8 million KWh in 2010 compared to 6,507.2 million KWh in 2009.
The growth in electricity generation was mainly driven by 49.3 per cent increase in production from hydro power sources associated with improved water levels at the seven forks dams.
Total Electricity consumption registered a growth of 6.0 per cent from 5,428.6 million KWh in 2009 to 5,754.7 million KWh in 2010. The number of connections under the Rural Electrification Programme rose by 22.3 per cent from 205,287 as at June 2009 to 251,056 as at June 2010.
Further the economic survey articulates that transport and Communication sector recorded a growth of 5.9 per cent in 2010 compared to 6.4 per cent in 2009. The growth was mainly driven by expansion of transport and storage subsector. Growth in the activities of the post and telecommunication slowed to 4.4 per cent in 2010 compared to a rapid expansion of 10.0 per cent in 2009.
The mobile subscriber base reached 20.1 million in 2010 from 17.4 million in 2009. Revenue earned from cargo transportation in the railway subsector decreased from KSh 4.3 billion in 2009 to KSh 4.1 billion in 2010.
Government directive to phase out 14-seater Public Service Vehicle (PSV) from 2011 started to take effect in 2010 with new registration of minibus/matatu declining by 19.7 per cent. Consequently, the number of newly registered buses and coaches went up by 19.6 per cent. Value of total exports grew by 18.8 per cent from KSh 344.9 billion in 2009 to KSh 409.8 billion in 2010. Value of imports grew by 20.2 per cent to Ksh 947.4 billion in 2010 compared to a marginal growth of 2.3 per cent in 2009.
Consequently, Kenya’s trade balance worsened by 21.3 per cent in 2010 compared to the earlier deterioration of 4.1 per cent in 2009. The current account balance widened to a deficit of KSh 199.2 billion in 2010 from a deficit of KSh 129.2 billion in 2009. Total transfers amounted to KSh 187.6 billion in 2010 of which the remittances in flow to the country was KSh 54.2 billion.
The capital and financial account recorded a surplus of KSh 187.4 billion in 2010 down from a surplus of KSh 200.0 billion recorded in 2009. The overall balance of payments deteriorated from a surplus of KSh 75.2 billion in 2009 to a surplus of KSh 12.2 billion in 2010.
This deterioration was on account of decreased net capital inflows coupled with deterioration in the current account balance. Total Government allocation to the social sector is expected to increase by 24.5 percent from KSh 208.8 billion in 2009/10 to KSh 259.9 billion in 2010/11.The allocation to Education subsector is expected to reach KSh 193.3 billion in 2010/11while that of health subsector is expected to reach KSh 31.6 billion in 2010/11.
Total development expenditure on water supplies and related services is expected to increase by 40.8 per cent from KSh 22.3 billion in the financial year 2009/10 to KSh 31.3 billion in Quantity of mineral production increased from 1,399 thousand tonnes in 2009 to 1,497 thousand tonnes in 2010.
Production of soda ash and fluorspar increased from 404.9 thousand tonnes and 5.5 thousand tonnes in 2009 to 473.7 thousand tonnes and 40.8 thousand tonnes in 2010, respectively.
The significant increase in production of the fluorspar is as a consequence of resumption of production by the mining company after temporary closure in 2009.
Quantity of fish landed in 2010 increased by 8.3 per cent to 144.5 thousand tonnes from 133.6 thousand tonnes in 2009. The forest plantation stocking decreased from 112.7 thousand hectares in 2009 to 111.8 thousand hectares in 2010, mainly due to increased forest fires.
In the year under review, the labour market recorded 503 thousand new jobs. This was attributed to improved economic conditions. Increased access to affordable credit from banks, the Women Enterprise Fund and the Youth Development Fund which aided in starting and expanding businesses thereby generating more jobs.
In total, 62.6 thousand new jobs were created in the modern sector, compared to 56.3 thousand in 2009, contributing 12.4 per cent of total jobs created. The bulk of the new jobs in the modern sector were created in Building and Construction, transport and communications, wholesale and retail trade, restaurants and hotels.
The informal sector which constituted 80.6 percent of total employment created an additional 440.9 thousand jobs. Government continued to implement governance reforms in line with Agenda 4 of the Kenya National Dialogue and Reconciliation process. Enactment of the new constitution which was promulgated in August 2010 was a milestone in the implementation of Agenda 4 Real GDP expanded by 5.6 per cent in 2010 compared to a growth of 2.6 percent in 2009.
The global economy is projected to continue on a recovery path but at a slower real GDP growth rate of 4.2 per cent in 2011 compared to 4.6 per cent in 2010.
Similarly the domestic economy is likely to maintain a positive growth but at a decelerated rate of between 3.5 and 4.5 per cent.
Risks likely to shape economic growth include: High international oil prices - which could remain high for the rest of the year (due to instability in the Middle East and North Africa).
Fluctuations in the exchange rate, inadequate rainfall - which has so far been insufficient, rising global food prices, political environment as the country moves close to 2012 elections.
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