Kenya

2023-02-08

Kenya, on the East African coast of the Indian Ocean, has a land mass of 580,370 km² and a total coastline of 536km. It has a population of 53 million and GDP of US$110.3bn, which grew by 6.7% in 2021 after a 0.3% contraction in 2020.

Growth was driven by services and private consumption, both benefiting from supportive policies and eased COVID-19 restrictions. Inflation climbed to 6.1% in 2021 from 5.3% in 2020, reflecting increased input costs.

The fiscal deficit nudged down to 7.9% of GDP in 2021 from 8% in 2020 due to improved revenue and reversed tax cuts as the economy recovered. Public debt surged to 68% of GDP at end-June 2021 from 63% in 2020, driven by the primary deficit. Kenya is assessed as being at high risk of debt distress with the current account deficit widening to 5.2% of GDP in 2021 on the back of an increased trade deficit.

The recently concluded general elections have set the stage for Kenya’s next development chapter. The country has made significant political and economic reforms that have contributed to sustained economic growth, social development, and political stability gains over the past decade. However, its key development challenges still include poverty, inequality, youth unemployment, transparency and accountability, climate change, continued weak private sector investment, and the vulnerability of the economy to internal and external shocks.

The Parliamentary Budget Office calculates that Kenya’s debt-to-GDP ratio will reach 70% by June 2023. It fears that any ratio above 64% will lead to “economic losses” and require GDP growth of 10% by 2030 to allow for financial consolidation.

The government’s Least Cost Power Development Plan 2017-2037 outlines current and planned energy sources and fuels for power generation in Kenya. It also provides an overview of renewable energy sources including biomass and cogeneration and biogas. The plan aims to increase installed energy capacity from 1,515MW to 10,621MW by 2031.
Incentives to attract foreign investment include a 10-year tax holiday for investors that establish businesses in Kenya, and international companies are permitted to repatriate all of their profits.

Sources: Who Owns Whom sector reports, CIA Factbook, African Development Bank, World Bank, Trading Economics, African Statistical Yearbook and IMF.