2018年-世界发展银行全球_Kenya_Economic_Update_April_2018_No_17___Policy_Options_to_Advance_the_Big_4_88页_8mb

Kenya Economic Update Summary (April 2018)

Core Content

This document presents the 17th edition of the Kenya Economic Update, focusing on the country's economic performance, poverty reduction, and policy options to advance the "Big 4" development agenda. It outlines the current state of the economy, growth projections, and key policy recommendations for the next five years.

Main Views and Key Information

1. Economic Performance

• Recent Developments:

  • Kenya's economy experienced a slowdown in 2017 due to poor rains, reduced credit to the private sector, and election-induced uncertainty.
  • The economy is showing signs of recovery, supported by improved global conditions, including a broad-based global economic recovery and better rains.
  • GDP growth is projected to rise from 4.8% in 2017 to 5.5% in 2018 and further to 6.1% by 2020.

• Growth Drivers:

  • The service sector has shown resilience, mitigating weakness in other areas.
  • Agricultural output is expected to rebound due to improved weather conditions.
  • Manufacturing activity is picking up pace in 2018.

• Challenges:

  • Fiscal consolidation is underway, with the government reducing spending.
  • Credit growth to the private sector remains weak.
  • Inflation has eased but is still within target ranges, with food and energy prices as the main drivers.
  • A widening current account deficit is influenced by rising oil prices and underperformance of exports.

2. Poverty Reduction

• Poverty Trends:

  • Poverty in Kenya has declined from 43.6% in 2005/6 to 35.6% in 2015/16.
  • The rate of poverty reduction is faster than in many sub-Saharan African countries but less responsive to growth compared to other lower-middle-income countries.

• Key Findings:

  • Poverty reduction is primarily driven by growth in the agricultural sector.
  • Progress is vulnerable to climatic shocks, highlighting the need for climate-resilient policies.
  • Non-monetary indicators of poverty, such as access to services, education, and health, show significant disparities.

• International Comparison:

  • Kenya's poverty headcount is below the SSA average but still relatively high for a lower-middle-income country.
  • The country's poverty reduction is less effective in translating growth into reduced poverty compared to other countries.

3. Policy Options to Advance the Big 4

• Big 4 Agenda:

  • Affordable housing
  • Universal health coverage
  • Increased share of manufacturing in the economy
  • Improved food security

• Policy Recommendations:

  • Macroeconomic Environment:

    • Restore the potency of monetary policy to support private sector lending.
    • Enhance fiscal sustainability by improving revenue mobilization and spending efficiency.
    • Create fiscal space for the Big 4 by rationalizing tax exemptions and slowing recurrent spending growth.

  • Agriculture:

    • Reallocate resources to agriculture, especially for smallholder farmers.
    • Improve extension services, irrigation, and fertilizer subsidies.
    • Pass the warehouse receipt bill to enhance access to finance.
    • Reform the seed market to ensure availability of high-yielding seeds.
    • Climate-proof the agriculture sector to reduce vulnerability.

  • Health:

    • Increase government subsidies for health coverage.
    • Strengthen the NHIF system through better costing, benefit packages, and provider payment mechanisms.
    • Improve the flow of funds to counties and public facilities.

  • Manufacturing:

    • Focus on the 3Cs: competitiveness, capabilities, and connectedness.
    • Develop industrial enclaves with reliable infrastructure and procedures.
    • Improve firm-level capabilities through management practices and international quality standards.
    • Enhance worker skills through education and ICT training.
    • Strengthen regional integration and leverage preferential trade agreements.

  • Affordable Housing:

    • Address supply and demand bottlenecks.
    • Implement supporting regulations to the Lands Act to increase land registration efficiency.
    • Introduce a lands record storage system and electronic conveyance regulations.
    • Amend the sectional properties Act to allow titles for multi-story units.
    • Lower yields on government securities to incentivize long-term lending.
    • Standardize mortgage contracts and review stamp duties for first-time buyers.

4. Risks and Outlook

• Downside Risks:

  • Domestic risks include fiscal slippages, continued interest rate cap, and potential drought.
  • External risks involve oil price spikes and negative spillovers from global markets.

• Outlook:

  • Domestic demand is expected to remain the main driver of medium-term growth.
  • The recovery is supported by improved global conditions, but requires continued attention to macroeconomic stability and structural reforms.

5. Conclusion

• The Big 4 agenda is ambitious but achievable with the right policy reforms.
• A stable macroeconomic environment and support from both public and private sectors are essential.
• The report emphasizes the need for inclusive growth, increased private sector participation, and a focus on poverty reduction through both growth and redistribution.

Key Figures and Tables

• Figure 1: Global growth pick-up is broad-based.
• Figure 2: Growth in the EAC countries decelerated in 2017, but is still above the SSA average.
• Figure 3: Multiple headwinds dampened economic performance in 2017.
• Figure 4: Resilience in the service sector mitigated weakness elsewhere in the economy.
• Figure 5: Drought conditions saw output in the agriculture sector decline, but a recovery is currently underway.
• Figure 6: Economic headwinds in 2017 adversely impacted manufacturing activity, but a modest recovery is underway.
• Figure 7: Business sentiment has sharply rebounded since the conclusion of the 2017 elections.
• Figure 8: Public sector spending has been an important driver of growth in recent years.
• Figure 9: Private investment contribution to GDP growth has declined.
• Figure 10: Government borrowing has kept yields of government securities elevated.
• Figure 11: Growth has been propped up in recent years by a decline in the drag from net exports.
• Figure 12: Government spending has been elevated in recent years.
• Figure 13: Expansionary fiscal policy contributed to elevated fiscal deficit levels.
• Figure 14: Fiscal consolidation has begun and is expected to continue into the medium term.
• Figure 15: Revenue growth has moderated.
• Figure 16: The overall increase in debt stock arises from both external and domestic sources.
• Figure 17: The primary fiscal deficit remains the key driver to rising debt stock.
• Figure 18: Inflation remains well within the target range.
• Figure 19: Food and energy prices continue to be the main driver of headline inflation in Kenya.
• Figure 20: Inflation decelerated sharply in most EAC economies due to improved weather conditions and subdued demand pressures.
• Figure 21: There has been a modest appreciation in the nominal exchange rate in 2018.
• Figure 22: Weakness in private sector credit growth continued unabated in 2017.
• Figure 23: The CBR has remained unchanged since September 2016 while interbank rates have been volatile.
• Figure 24: Rise in non-performing loans contributed to tighter lending conditions in 2017.
• Figure 25: Deteriorating balance of trade led to widening current account deficit.
• Figure 26: Capital inflows have helped to finance the current account deficit and accumulate reserves.
• Figure 27: Foreign portfolio flows have favored government bonds over equity in recent months.

References and Acknowledgements

• The report was prepared by a team led by Allen Dennis and Christine Awiti, with contributions from various experts and stakeholders.
• It was supported by the World Bank, Kenya National Bureau of Statistics, and the Central Bank of Kenya.
• The report acknowledges the collaboration with the National Treasury, Ministry of Planning, and private sector participants.