KENYA

ECONOMIC SURVEY
2009
HIGHLIGHTS
 ECONOMIC SURVEY 2009

PRESENTED BY

Hon. Wycliffe Ambetsa Oparanya, EGH. MP.

Minister of State for Planning, National
Development and Vision 2030

21ST May, 2009

 ECONOMIC SURVEY 2009

The Economic Survey 2009

Present highlights of the economy for 2008

And key socio-economic statistics for the
period 2004 to 2008

3
 Overview

 Country experienced remarkable sustained

economic growth for the period 2003 - 2007
with the GDP growth rate reaching 7.1
percent in 2007, the highest growth rate
over the period.

4
 Overview

However 2008 was affected by:

Internal shocks
-Post election disruptions
-Unfavourable weather conditions
-High cost of food and fuel prices
-Continued Political bickering

External shocks
-High crude oil prices
-Global financial crisis

5
International Scene

The Global economy expanded by 2.7% in 2008

compared to 3.7% growth in 2007

In the USA, GDP grew by 1.4%; the slowest since
2001

Japan’s economy expanded by 0.5% in 2008. This
was the slowest growth since 2002 when it grew
by 0.3%

Africa’s growth slowed to 5.9% in 2008 from
6.3% in 2007

Sub-Saharan Africa also slowed to 6.1% in 2008
compared to 6.9% in 2007

6
 International Scene cont’d

There was a resurgence of high inflation; with average

rates being 3.6% for advanced economies, 7.3% for
emerging Asia and 10.2% for Africa in 2008

Growth in fuel importing countries was restrained by

high energy prices

However, there was improved terms of trade for many

African countries due to a surge in commodity prices
which boosted growth

7
 Performance of Kenya’s Economy

Real Gross Domestic

8
7.1 Product (GDP) is
6.3
7 5.9 estimated to have
5.1
expanded by 1.7% in
Growth Rate (%)

5 2008 compared to a
4 7.1% in 2007
1.7
3

1
This is the lowest

0 growth rate since 2003
2004 2005 2006 2007 2008

8
 Domestic Economy Cont’d

Sectors which recorded positive growths:-

Sector 2007 2008
Construction 6.9% 8.3%
Education 3.7% 5.8%
Wholesale & Retail trade 11.5% 5.1%
Manufacturing 6.5% 3.8%
Transport & 15.1% 3.1%
Communication
Financial Intermediation 6.7% 3.1%
9
 Domestic Economy Cont’d

Sectors in which output contracted

Sector 2007 2008

Hotels and restaurants 16.3 % -36.1 %

Agriculture and forestry 2.0 % -5.1 %

10
Economic Performance by
Sector

11
 Social Scene

Central Government expenditure on social

services increased by 7.8% from KSh 187.8
billion in 2007/08 to KSh 202.4 billion in
2008/09

Local Government expenditure on this sector

rose by 14.7% from KSh 4.1 billion to KSh 4.7
billion over the same period

12
Social Scene; Selected indicators for Education

Indicator 2007 2008 % change

No. of Primary schools 26,104 26,206 0.4%
No. of Secondary schools 6,485 6,566 1.2%
Total enrollment in Primary 8.33 m 8.56m 2.8%
Total enrollment in Secondary 1.18 m 1.33m 12.7%
Gross enrollment rate for boys 110.7% 118.1%
Gross enrollment rate for girls 104.4% 113.1%
No. of Primary school teachers 173,157 170,059 -1.8%
No. of Sec. school teachers 44,305 43,016 -2.9%
Pupil/teacher ratio (Primary) 44:1 45:1
Student/teacher ratio (Sec) 23:1 28:1
13
Social Scene; Selected Indicators for Health

Indicator 2007 2008 % change

No. of health institutions 5,589 5,712 2.2%

No. of registered medical 73,236 77,736 6.1%

personnel
No. of medical students 4,640 5,814 25.3%
(university)
No. of medical students (MTC) 5,932 6,090 2.2 %

No. of medical personnel per 197 203 3.0 %

100,000 of population

Full Immunization Coverage 73.0 % 71.0 %

(FIC) Rate

14
 Social Scene; Health cont’d

National Health Insurance Fund (NHIF) receipts increased

by 14.1% to KSh 4.5 billion in 2007/08

Over the same period, benefits to members rose by 31.2%

to stand at KSh 1.9 billion in 2007/08

Central government allocation to the Ministries of Medical

services and Public and sanitation decreased by 5.7% from
KSh 36.7 billion in 2007/08 to KSh 34.6 billion in 2008/09

15
 Governance

Total number of crimes reported to the Police

rose to 63,476 cases in 2008 from 63,028 cases
the previous year

Cases reported to KACC dropped from 6,728 in

2007 to 3,637in 2008

Cases filed in magistrates’ courts declined from

408,097 in 2007 to 343,152 in 2008

Cases disposed of by magistrates’ courts went

down from 500,788 in 2007 to 353,136 in
2008
16
 Governance; Selected Indicators

Indicator 2007 2008 % change

Crimes reported to police 63,028 63,476 0.7%
Firearms/ammunitions recovered 7,288 9,621 32.0%
Cases reported to KACC 6,728 3,637 -45.9%
Cases filed in magistrates’ courts 408,097 343,152 -15.9%
Cases pending in magistrates’ 780,772 768,908 -1.5%
courts
Cases disposed of by magistrates’ 500,788 353,136 -29.5%
courts
Convicted prison population 89,770 88,414 -1.5%
Daily average population – 22,249 25,429 14.3%
convicted prisoners
Daily average population – 41,917 46,602 11.2%
remanded prisoners

17
 Governance; Selected Indicators

Personnel in the police, prisons, probation and law

courts
Indicator 2007 2008 % change

Police officers 40,997 45,057 9.9%

Prison officers 16,526 17,255 4.4%

Probation officers 415 465 12.0%
Magistrates 252 287 13.9%

Judges 60 58 -3.3%
18
Employment, Earnings and Consumer Prices

New jobs created declined from 485.5 thousand in

2007 to 467.3 thousand in 2008

Employment creation in the modern private sector

decelerated by 67.7%; from 74.0 thousand new
jobs in 2007 to 23.8 thousand new jobs in 2008

Employment in the public sector rose marginally by

1.6% in 2008 to 638 thousand employees from a
decline of 3.4% in 2007

19
Employment, Earnings and Consumer Prices
cont’d

Employment in the informal sector is estimated to

have expanded from 7.5 million in 2007 to 7.9
million in 2008

Monthly average earnings in the modern sector

rose by 8.3% from KSh 28,666 in 2007 to KSh
31,058 in 2008

However, real average earnings contracted by

16.2% in 2008 due to high inflation during the year

20
 Inflation Rates

The average annual 30

26.2
inflation rate rose 25

from 9.8% in 2007 to 20

26.2% in 2008 15 14.5

11.6
9.8 10.3 9.8
10

This was the highest 5

rise in inflation since 0

1994 when it reached 2003 2004 2005 2006 2007 2008

28.8%

21
 Inflation Cont’d

Underlying inflation rose from 5.7% in

2007 to 11.1% in 2008

The rise in inflation was caused by the

high food and fuel prices witnessed during
the period under review

22
 Money, Banking and Finance

Broad money supply, M3 expanded by 15.9% in

2008 compared to 19.1% in 2007

Total domestic credit rose from KSh 670.8

billion in Dec 2007 to KSh 827.4 billion in Dec
2008 representing a 23.3% rise

Domestic credit advanced to the Government

and to the Private sector increased by 24.5%
and 18.8%, respectively in 2008
23
 Money, Banking and Finance cont’d

Interest rate type 2007 2008 Change

(end of period) (percentage
points)
91-day treasury bill 6.87 8.59 1.72
Loans and advances 13.32 14.80 1.48
for commercial banks

Overdrafts 12.96 14.40 1.44

Commercial bank 1.67 1.62 -0.05
deposit (savings)

24
 Money, Banking and Finance cont’d

The NSE 20-share index recorded sharp drop

(along with the rest of the world) of 1924 to
3531 points by end of Dec 2008

Despite the drop in NSE 20-share index, market

capitalization rose marginally from KSh 851
billion in December 2007 to KSh 854 billion in
December 2008 owing to Safaricom IPO

Total bond turnover rose by 12.4 per cent to KSh

95.4 billion in 2008 from KSh 84.9 billion in 2007
25
 Public Finance

The Government expenditure for 2008/09 is

expected to reach KSh 773.0 billion from KSh
658.1 billion spent in 2007/08

Development expenditure for 2008/09 budget

accounted for 26.8 per cent from 24.4 per
cent in 2007/08

Total Government receipts for 2008/09 are

expected to reach KSh 549.6 billion compared
to KSh 468.6 billion in 2007/08

26
 Public Finance cont’d

Stock of outstanding debts as at the end of

June 2008 was KSh 748.5 billion as compared
to KSh 715.5 billion in June 2007

Stock of outstanding foreign debt as at the

end of June 2008 was KSh 413.5 billion
compared to KSh 397.1 billion in June 2007.

LATF funds increased to KSh 9.25 billion in

2008/09 from KSh 8.25 billion in 2007/08

27
 International Trade and BOP

The overall balance of payments deteriorated

from a surplus of KSh 63.3 billion in 2007 to a
deficit of KSh 33.2 billion in 2008

The BOP deficit was mainly on account of

Decreased foreign direct investment inflows and

Widened merchandise trade deficit

28
 International Trade and BOP Cont’d

Trade balance widened from a deficit of KSh

330.5 billion in 2007 to a deficit KSh 425.7
billion in 2008 representing a deterioration of
28.8 per cent.

Value of total exports increased from KSh 274.7

billion in 2007 to KSh 344.9 billion in 2008

Total imports also increased by 27.4 per cent to

reach KSh 770.7 billion in 2008 compared to KSh
605.1 billion in 2007

29
 International Trade and BOP Cont’d

The current account balance deteriorated further

from a deficit of KSh 69.6 billion in 2007 to a
deficit of KSh 136.9 billion in 2008

The capital and financial account recorded a

declined surplus of KSh 81.1 billion in 2008 from a
surplus of KSh 150.1 billion in 2007

30
 Agriculture

Production in almost all the sub-sectors of

Agriculture declined

Real value added for the sector declined by 5.4

per cent in 2008 compared to a growth of 2.2 per
cent in 2007

Major factors that led to the decline include

High prices of inputs

Adverse weather conditions and

Disruption from the post election violence

31
 Agriculture cont’d

The contraction in agricultural production led to

price increases of most of the food commodities

Maize production declined from an estimated 32.5

million bags in 2007 to 26.0 million bags produced
in 2008

Likewise, wheat production declined from 112.9

thousand tonnes in 2007 to 82.6 thousand tonnes
in 2008

32
 Agriculture cont’d

Exports of horticultural produce increased

marginally by 0.5 per cent from 192.2 thousand
tonnes in 2007 to 193.1 thousand tonnes in
2008

However, export earnings from horticulture

declined from KSh 67.3 billion in 2007 to KSh
58.0 billion in 2008 due to reduction in prices

33
 Environment and Natural Resources

Water

Development expenditure on water supply &
related services increased from KSh 8.4 billion in
2007/08 to KSh 10.6 billion in 2008/09
Fisheries

Quantities of fish landed rose from 135.1
thousand tonnes in 2007 to 142.5 thousand
tonnes in 2008
Forestry

Forest plantation stocking rose from 112.3
thousand hectares in 2007 to 114.0 thousand
hectares in 2008
34
Environment and Natural Resources Cont’d

Mining

Mineral production increased by 14.5 per cent
from 1,350.0 thousand tonnes in 2007 to 1,545.2
thousand tonnes in 2008

Value of minerals produced rose by 76.0 per cent
to KSh 12.3 billion in 2008

Wildlife

Most wildlife herbivores declined due to
• Poaching
• Migration due to loss of habitat
• Unfavourable weather

35
 Energy

For the better part of 2008 the international

prices of fuel were on an upward trend

However, crude oil prices declined in the 4th
quarter of 2008

High oil prices were occasioned by

Speculative demand

Unstable geo-political situation in some oil-
producing countries

Increased demand, particularly in Asia and Latin
America

36
 Energy Cont’d

Mur ban Adnoc Pr i ce s 2007 and 2008

160

140

120
Price US$ per Barrel

100

80

60

40

20

0
Ja n F eb Ma r A p r Ma y Ju n Ju l A ug Sep Oct No v Dec

2007 2008

37
 Energy Cont’d

Total demand for petroleum products rose

marginally by 2.0 per cent from 3,218.3
thousand tonnes in 2007 to 3,283.0 thousand
tonnes in 2008.

The total quantity of petroleum products

imported into the country dropped by 3.0 per
cent from 3,691.8 thousand tonnes in 2007 to
3,579.7 thousand tonnes in 2008.

38
 Energy cont’d

Hydro-electricity generation declined from

3,591.5 GWh in 2007 to 3,271.8 GWh in 2008
due to inadequate rainfall experienced in most
parts of the country

This resulted to increased reliance on thermal

generation which rose to 2,145.4 GWh in 2008
from 1,735.8 GWh in 2007

Total electricity generation posted a
decelerated growth of 2.1 per cent in 2008
compared to a growth of 7.3 per cent in 2007

39
 Manufacturing

The sector’s real value added grew at 3.8 per cent

in 2008 compared to a higher growth of 6.5 per
cent in 2007

This growth was against a number of challenges

Supply disruption and temporary closures during the post-
election skirmishes

Stiff competition from cheap imports and counterfeits

Subdued domestic and external demand

40
 Manufacturing cont’d

Manufacture of food, beverages and tobacco were

the most affected; their combined valued added
contracted by 1.7 per cent in 2008 compared to an
expansion of 9.3 per cent in 2007

However, Manufacture of non-food items grew by

6.3 per cent in 2008 compared to 5.2 in 2007

41
 Building and Construction

The sector recorded a growth of 8.3 per cent in

2008 compared to 6.9 per cent in 2007

This growth was largely supported by increased

capital investments in roads and housing

Government expenditure on housing rose from

KSh 3.1 billion to KSh 4.1 in 2008

42
 Building and Construction cont’d

Disbursement of funds by Kenya Roads Board

rose from KSh 15.4 billion in 2007 to KSh 19.0
billion in 2008

In total

502 kilometers of roads were maintained

1,411.8 kilometers of roads were rehabilitated

808.8 kilometers of roads were constructed

43
 Tourism

The sector recorded one of its worst

performances ever in real terms.

The dismal performance was occasioned by

Post election crisis

The global financial crisis

Tourism earnings decreased by 19.2 per cent

from KSh 65.2 billion in 2007 to KSh 52.7
billion in 2008

44
 Tourism cont’d

Volume of international arrivals declined by 33.8

per cent in 2008 to 1.2 million from 1.8 million
attained in 2007

Bed occupancy rate dropped to 26.0 per cent in
2008 from 47.2 per cent in 2007

Visitors to Game Parks and Reserves decreased by
34.5 per cent from 2.5 million in 2007 to 1.6
million in 2008

45
Transport, Storage and Communications

The sector recorded its slowest growth since

1998

Its value added grew by 3.1 per cent in 2008

compared to 15.1 per cent in 2007

The depressed output was mainly on account of

Disruption caused by the 2007 post election violence

Increased oil pump prices

46
 Transport Storage
Transport, and Communications Cont’d
and Communications

The number of mobile subscriber base increased

to 12.9 million in 2008 from 9.3 million in 2007

Mobile telephony saw entrance of 2 new players;
Telkom Orange and Econet

The number of newly registered vehicles
increased significantly by 42.8 per cent from
85,324 in 2007 to 121,831 in 2008

Commercial passenger air traffic dropped from
7.0 million in 2007 to 6.4 million in 2008

47
 Transport and Communications Cont’d

Volume of traffic throughput at the Port of

Mombasa increased marginally by 2.8 per cent;
from 16.0 million tonnes in 2007 to 16.4 million
tonnes in 2008

Overall pipeline throughput declined by 2.9 per

cent to stand at 3.8 million cubic meters in 2008
from 4.0 million cubic meters in 2007

Railway freight tonnage transported decreased by

23.4 per cent from 2.3 billion in 2007 to 1.8 billion
tonnes in 2008

48
 Outlook 2009; International Scene

The outlook for the global economy for the

year 2009 is bleak

Although the global financial crisis is expected

to ease within the course of 2009, its effects
are likely to impact negatively on many of the
OECD countries

In line with these expectations, most of the

major economies of the world are projected to
contract as shown in the table below:
49
Outlook 2009; International Scene Cont’d

Country/Region Projected Growth (%)

United States of -0.9
America
Japan -0.1
Germany -0.8
United Kingdom -1.1
Euro Area -0.6
Sub-Saharan Africa 6.3

50
 Outlook for Kenya in 2009

Economic growth in Kenya is largely going to be

determined by a number of factors

 Production in agriculture:- might remain subdued

due to delay in long rains
 Tourism:- likely to perform below potential due to
low level of prosperity in source nations
 The duration of the Global crisis

 Political Governance:- Restoration of investor

confidence is dependent on a rapid return to
credibility in governance structure

51
 Outlook for Kenya in 2009 Cont’d

To urgently mitigate the slowdown in the economy

the 2009/10 Budget will therefore address the
following key areas:-
● Infrastructure – More resources need to be
earmarked for expansion and rehabilitation of
the road, power, railways and ports
● Tourism- Aggressive marketing both internally
and externally is required to revive the sector
● Agriculture-Subsidizing of agricultural inputs
and irrigation development
● Security

52
 Outlook for Kenya in 2009 Cont’d

• Manufacturing – Lower the cost of production and

urgently address the issue of cheap
imports/counterfeit goods which are forcing
companies to close down

• Water and Environment – Conservation of the

environment and water (water catchment areas)

• Kazi Kwa Vijana –requires urgent refocusing on

key impact areas both at employment level and
activity areas like afforestation, construction of
rural roads and damming of seasonal rivers and
construction of water pans

53
Outlook for Kenya in 2009 Cont’d

Education - Teacher employment needs to be

addressed taking note that the total number of
teachers at both primary and secondary school level
is on the decline while enrolment is expanding.

Lastly, with stable macroeconomic variables, the

economy is estimated to expand by between 2.0
and 3.0 per cent in 2009

54
 Closing Remarks

I take this opportunity to thank all of you for attending the Launch of
this year’s Economic Survey.

My sincere appreciation goes to all the data producers, both large and
small establishments, for their valuable input into this report.

I appeal to all data producers, who are still unwilling to provide data to
do so, as this information is crucial in the planning and development of
our country.

My special thanks goes to the Director General and entire staff of

KNBS who have tirelessly worked hard to make the production of this
document a success.

Finally, it is my pleasure to now declare the Economic Survey 2009

officially launched.

55