Dissecting Kenya-East Africa's Largest economy

In 2011 Kenya’s economy recorded “checked” growth, primarily driven by financial intermediation, tourism, construction and agriculture sectors. Gross domestic product (GDP) growth rate for the first nine months was estimated at 4.2%, down from 4.9% in the same period in 2010. Overall, growth in 2011 was curtailed by an unstable macroeconomic environment characterized by rising inflation, exchange rate depreciation and high energy costs.

The country also experienced limited rainfall in the first half of 2011, which affected aggregate food production. 

 The year 2011 is therefore expected to record moderate positive growth estimated at 4.5%. Growth is expected to rise to 5.2% in 2012, and to 5.5% in later years.

Kenya witnessed moderate political activity in 2011 compared with 2010. The year 2010 saw heightened tensions associated with referendum campaigns for the new constitution (promulgated on 27 August 2010) and the naming of six Kenyans to appear at the International Criminal Court (ICC) in relation to the 2008 post-election crisis.

The year 2011 was characterised by the passing of legislation giving effect to the new constitution, and the appearance of the six Kenyans at the ICC, while political parties began preparing for elections expected in 2012.

Overall, the Country Policy and Institutional Assessment (CPIA) findings for 2011 somewhat mirrored those of 2010. Scores for macroeconomic policies, institutions for economic co-operation, regional integration and trade, business regulatory environment, environmental policies, efficiency of revenue mobilisation, quality of public administration, and transparency, accountability and corruption all remained the same for two consecutive years.

 Little variation in other CPIA scores led to little change in the overall CPIA score.

Youth unemployment is a growing problem, as it constitutes 70% of total unemployment in Kenya.

The Youth Enterprise Development Fund, operational over the last five years as the main remedy, has disbursed KES 5.96 billion (Kenyan shillings) to some 157 538 youth enterprises, organised youth trade fairs, built sheds and stalls for youth, and started pre-financing youth training, among other interventions.

The fund will be expanded in the coming years to ensure increased employment for the young. 

Figure 1: Real GDP growth (Eastern)

Real GDP growth (%)Eastern Africa - Real GDP growth (%)Africa - Real GDP growth

(%)200320042005200620072008200920102011201220130%2%4%6%8%10%Real GDP Growth (%)

Figures for 2010 are estimates; for 2011 and later are projections.

Table 1: Macroeconomic Indicators

	2010	2011	2012	2013
Real GDP growth	5.6	4.5	5.2	5.5
Real GDP per capita growth	3	1.8	2.5	2.8
CPI inflation	4.1	14	7.6	6.9
Budget balance % GDP	-7	-6.9	-8	-7.5
Current account % GDP	-6.8	-12.2	-11.5	-12.4