Kenya rebases its contracted economy, pushing GDP up $4b

Saturday September 11 2021

Kenya’s economy grew by five percent in 2019 before sliding to a negative growth in 2020 largely as a result of the disruption in labour supply. PHOTO | FILE | NMG


The annual economic performance data released last week by the National Treasury Cabinet Secretary Ukur Yatani shows that the private sector terminated 206,700 jobs as part of cost cutting measures, with the informal sector letting go a massive 493,300 employees.

The public sector however hired 19,400 more workers during the period, according to the delayed Economic Survey (2021).

“Full resumption of activities in the education sector and the hotel industry that were almost halted for the better part of 2020, is likely to significantly boost the growth. Other key sectors like manufacturing and transportation are likely to rebound and support the country’s economic growth,” said Mr Yatani.

During the period, the National Treasury rebased the country’s economy by changing the base year to 2016 from 2009 thereby pushing the nominal GDP upwards by 4.84 percent to Ksh10.75 trillion ($97.72 billion) from Ksh10.25 trillion($93.18 billion) in 2019.

But the revising and the rebasing of the National accounts which started in 2017 could not neutralise the glaring impact of the Covid-19 pandemic, whose cases had reached over 214,783 last week and claimed over 4,830 lives.

Lower middle income


In 2014, Kenya also rebased its economy, which increased its size by 25 per cent and propelled the country to lower middle-income status.

In the same period, Nigeria rebased its economy and overtook South Africa to become the continent’s biggest economy

Rebasing the national account, which includes the GDP, is the process of replacing an old base year with a new and more recent base year, with the aim of presenting the most possible accurate state of the economy.

According to the United Nations Statistical Commission, countries should rebase their economies after every five years.

In 2019, Tanzania rebased its economy for the sixth time since 1966 to include the informal sector as a way of expanding coverage of economic activity and boosting the country’s financial status, which has heavily relied on agriculture.

The country changed the base year for GDP calculations from 2007 to 2015 thereby growing the economy by 3.8 per cent.

Growth before Covid-19

Kenya’s economy grew by five percent in 2019 before sliding to a negative growth in 2020 largely as a result of the disruption in labour supply brought about by restriction of movement and social distancing to contain the spread of Covid-19 and reduced demands for goods and services.

According to the government statistics the contraction in the economy was spread across all sectors of the economy, though it was more pronounced in accommodation and food serving activities, education, professional and administrative service activities.

In the tourism sector, the number of international arrivals declined by 71.5 per cent to 579,600 in 2020 causing tourism earnings to drop by 43.9 per cent to Ksh91.7 billion($833.63 million) in the same period.

Manufacturing sector growth slowed down to 0.2 percent from 2.8 per cent in 2019 while transport sector’s gross value added declined by 7.8 percent from a growth of 6.3 percent.

According to the report, agriculture, forestry and fishing activities were more vibrant despite a contraction in global demand in 2020, growing by 4.6 per cent compared to 2.3 per cent in 2019.

The sectors that experienced growth included agricultural production which grew by 4.8 per cent), construction activities (11.8 per cent), financial and insurance activities (5.6 per cent) and health services activities (6.7 per cent).

Agriculture remained the dominant sector, accounting for 23.0 per cent of the total value of the economy in 2020 while industry related activities accounted for 17.1 per cent of the total contribution in GDP growth in the same period.

The construction sector registered a growth of 11.8 per cent in 2020 compared to growth of 5.6 per cent in 2019, with cement consumption rising significantly to 7.4 million tonnes from 6.1 million tonnes representing an increase of 21.3 per cent.

Loans and advances from commercial banks to the construction sector grew by 3.4 per cent to Ksh119.7 billion ($1.08 billion) from Ksh 115.8 billion ($1.05 billion).

The value of public buildings completed increased to Ksh 9.08 billion ($82.54 million) from Ksh 1.5 billion ($13.63 million).