NAIROBI, March 31, 2016—Kenya’s economy is projected to grow at 5.9% in 2016, recording an improvement over the 5.6% estimated for 2015, says a new World Bank Group economic report released today. The Gross Domestic Product (GDP) is expected to improve further to 6% in 2017.
The Kenya Economic Update (KEU): Kazi ni Kazi: Informality Should Not Be Normal attributes the positive outlook to low oil prices, good agriculture performance, supportive monetary policy, and ongoing infrastructure investments. Kenya experienced strong economic performance in 2015, and has exceeded the average growth for Sub Saharan Africa countries consistently since 2009, the report adds.
The KEU reviews Kenya’s economic performance in the context of three global factors which have been discussed for some time, and are now in full force. These include: industrialized countries’ monetary policy adjustment; the end of the commodity price boom, and the rebalancing of Chinese economy. The report says that the interaction between these global factors with domestic policy and conditions will determine Kenya’s growth in the near term.
“The prevailing global conditions call for a more vigilant policy stance which is supportive of growth,” said Diarietou Gaye, World Bank Country Director for Kenya
According to the report, Kenya’s economy remains vulnerable to domestic risks that could moderate the growth prospects. These include: first, the possibility that investors could defer investment decisions until after the elections; second, that election related expenditure could result to a cut back in infrastructure spending, and third, security remains a threat, not just in Kenya but globally. Finally, changes in monetary policy in industrialized countries could trigger volatility in financial markets putting the currency under pressure.
The KEU, whose special focus is on jobs notes that Kenya is creating more jobs now, but mainly in the informal sector. In the next ten years, nine million youth will enter the labor market, a majority will continue to find jobs in the informal sector, the report adds.
“Kenya is not short of jobs; it is short of high productivity jobs,” said Jane Kiringai, the Bank’s Senior Country Economist for Kenya and the lead author of the report. “To increase productivity of jobs in the informal sector, policy interventions could be geared towards increasing access to broad skills beyond formal education, creating linkages between formal and informal firms, and helping small scale firms enter local and global value chains.”
To create more and better jobs, it is also imperative to reduce the cost of doing business which is necessary for a robust private sector, the report adds.
KAMPALA, March 03, 2015— Uganda’s urban population will increase from six million in 2013 to over 20 million in 2040. Policy makers need to act now to ensure that this rapid urbanization is managed well, so it can contribute to Uganda’s sustainable and inclusive growth, a report released today by the World Bank Group shows.
For the first time, the report compares data on urban areas and their populations in a consistent manner across Uganda, providing governments and local leaders with analyses to improve planning and coordination to deliver better services, jobs and opportunities, making cities more competitive.
“The typical Ugandan city has grown rapidly, but without sufficient policy coordination. As a result, urbanization has not necessarily resulted in increased productivity, with the majority of jobs created involving low productivity activities,” said Hon. Daudi Migereko, Minister of Lands, and Housing and Urban Development. “This report will help government get a better picture and take action on how to spur the economy from the lackluster growth performance experienced over the past half-decade, to a higher growth path that can catapult the country into middle income status.”
The Fifth Uganda Economic Update, titled: “The Growth Challenge: Can Ugandan Cities get to Work?” focusses on urbanization and notes that while the majority of the population is still concentrated in rural areas, non-agricultural economic growth and jobs are concentrated in urban areas. The report shows that while cities can help propel growth, the speed of urbanization is challenging and can lead to congestion and strain infrastructure, lowering productivity.
“By managing the urbanization process effectively, Uganda will be more likely to achieve middle income status by 2040. However, current patterns of growth pose a significant challenge,” said Philippe Dongier, the Country Director for the World Bank Group for Uganda, Tanzania and Burundi. “Urban population growth multiplies the number of challenges already facing urban areas and hinders their ability to be the sources of growth, to create productive jobs and to provide decent housing to urban residents.”
The Update has been prepared to assist government in ensuring that its cities are ready to accommodate the increasing number of residents expected to settle in urban areas and able to facilitate the growth of business enterprises, thereby creating opportunities for productive employment for a greater proportion of city residents.
“Cities have the potential to propel growth, attracting capital, spurring innovation, providing higher productivity jobs. Services can be provided more cost-effectively, improving access for all,” said Somik Lall, Lead Urban Economist. “To reap these benefits, urban growth needs to be managed well by planning for land use and basic services, connecting to make a city’s markets accessible, and financing to meet infrastructure needs.”
“To ensure the development of functional cities, the public sector will require the coordination of a range of different types of investment, including investment in physical planning for buildings and the provision of transport, housing and social services,” said Rachel Sebudde, Senior Economist and Lead author of the report. “Each layer faces its own coordination challenges. It is better to anticipate and plan for this at the very early stages of the urbanization process, as it becomes very difficult to correct mistakes retrospectively.”
Policy makers at national and municipal levels have an important role to play in ensuring that urbanization is sustainable and inclusive by ensuring that land and property rights are conducive for increasing economic density of cities. They will also have to improve mobility through better transport infrastructure and systems, as well as improve living conditions through better housing policies. Furthermore, it will be critical to improve access to social services such health and education; and levelling access to, and quality of, public services such as water and sanitation services.
Urbanization in Numbers
Nairobi, March 5, 2015—Buoyed by falling oil prices, Kenya’s growth is projected to rise from 5.4 percent in 2014 to 6-7 percent over the next three years (2015-2017), making it one of the fastest-growing economies in Sub-Saharan Africa according to the latest Kenya Economic Update (KEU) published by the World Bank.
The eleventh edition of the KEU notes that external and internal balances are expected to improve significantly, thanks to falling oil prices. In addition public investment in infrastructure, mainly in energy and standard gauge railways, will strengthen growth in the medium term.
“Kenya is emerging as one of Africa’s key growth centers with sound economic policies in place for future improvement” said Diarietou Gaye, the World Bank’s Country Director for Kenya. “To sustain momentum, Kenya needs to continue investing in infrastructure and jobs, improve its business climate, and boost it exports.”
The report says that the country’s expansive fiscal policy allowed it to finance major infrastructure projects without putting excessive pressure on domestic financing. “Kenya’s accommodative monetary policy stance has supported economic activities without triggering inflation or putting pressure on the exchange rate.” said John Randa, World Bank Group’s Senior Economist for Kenya and lead author of the report.
Sluggish demand for exports and their declining production is widening the country’s current account deficit. The report suggests that in order to anchor and sustain growth, Kenya needs to boost productivity and improve the business environment to regain and increase its competitiveness.
In recent years the manufacturing’s contribution to Kenyan exports and growth has fallen behind and performance has been less than optimal. “Kenya needs to increase the competitiveness of its manufacturing sector so that the country can grow, export, and create much-needed jobs, said Maria Paulina Mogollon, World Bank Group’s Private Sector Development Specialist and a co-author of the report.
A strong manufacturing sector will create more employment, especially for young people in Kenya. The report suggests that this will also increase exports and reduce the country’s external vulnerability from a widening account deficit.
The report highlights key steps for Kenya to take including implementing the business reform agenda, completing reforms at the port of Mombasa, improving the efficiency of its massive infrastructural projects, strengthening governance, improving productivity, and continuing to maintain macroeconomic stability.
The KEU is prepared by the World Bank in collaboration with stakeholders from the government especially the members of the Economic Roundtable who include the Ministry of Devolution and Planning, Ministry of Industrialization and Enterprise Development, Central Bank of Kenya, Kenya School of Monetary Studies, Kenya Vision 20130 Secretariat, Kenya Institute for Public Policy Research and Analysis, Kenya National Bureau of Statistics and the International Monetary Fund.