2017年-世界发展银行全球_Kenya_Economic_Update_December_2017___Poised_to_Bounce_Back__90页_3mb

Kenya Economic Update Summary (December 2017 Edition No. 16)

Core Content

The Kenya Economic Update for December 2017 highlights the state of Kenya's economy, growth prospects, and key policy challenges. It emphasizes the need for structural and sectoral reforms to support sustainable and inclusive growth, particularly in the context of the Vision 2030 development agenda.

Main Points

1. Recent Economic Developments (2017)

• GDP Growth: Kenya's GDP growth slowed from 5.8% in 2016 to 4.8% in the first half of 2017, marking its weakest performance in five years.
• Agricultural Sector: Agricultural output was heavily impacted by a prolonged drought, which began in 2016 and worsened in 2017, leading to contraction in this sector and dampening household consumption.
• Non-Agricultural Sectors: The services sector remained robust, helping to offset some of the weakness in agriculture. However, the industrial sector, particularly manufacturing, showed lethargy.
• Private Sector: Private sector credit growth declined sharply since 2015, reaching a 1.6% growth rate in August 2017. The slowdown was attributed to liquidity shocks, banking system confidence issues, and a segmented interbank market.
• Public Sector: Public sector spending remained strong, while private sector demand weakened due to the election-induced "wait-and-see" attitude.
• Inflation: Headline inflation peaked in H1 2017 but has since declined toward the target range, with food inflation remaining a key driver.
• Exchange Rate: The exchange rate remained relatively stable throughout the year.
• Current Account: The current account deficit widened due to increased imports, but was partially offset by capital inflows.
• Fiscal Deficit: The fiscal deficit remained high, with government expenditure driven by development spending and underperformance in revenue mobilization.

2. Growth Prospects

• Medium Term Outlook: Economic growth is expected to rebound to 5.5% in 2018 and 5.9% in 2019, assuming policy reforms and the easing of headwinds.
• Growth Drivers: Domestic demand will continue to be the main driver of growth. However, the recovery is contingent on addressing significant domestic and external risks.
• Fiscal Consolidation: The report underscores the importance of fiscal consolidation to safeguard macroeconomic stability and support long-term growth.

3. Key Risks

• Domestic Risks:
  • Delays in fiscal consolidation risk undermining macroeconomic stability.
  • Weakness in credit growth could hinder the recovery of the private sector.
  • Lingering political uncertainty may further erode business confidence.
• External Risks:
  • Global economic conditions and commodity price fluctuations could affect Kenya's growth trajectory.

Special Focus I: Slowdown in Private Sector Credit Growth

• Causes of Slowdown:
  • The liquidity shock of 2015/16.
  • The resolution of three non-systemic banks, which affected banking system confidence.
  • Segmented interbank market leading to liquidity constraints.
  • The interest rate cap introduced in 2016, which made the lending environment more challenging.
• Impact of Interest Rate Cap:
  • Banks shifted credit towards corporate and government sectors, reducing support for SMEs and households.
  • The proportion of new borrowers dropped significantly, affecting entrepreneurship and job creation.
  • The cap undermined the Central Bank's ability to implement monetary policy effectively.
• Policy Recommendations:
  • Remove the interest rate cap to stimulate private sector credit growth.
  • Implement macroeconomic and microeconomic reforms to improve credit access and financial inclusion.
  • Strengthen the credit scoring system and establish an electronic collateral registry.
  • Improve consumer protection and financial literacy to counter predatory lending.

Special Focus II: Enhancing Revenue Mobilization

• Revenue Performance:
  • Despite strong GDP growth, revenue collection underperformed targets by an average of 3.7 percentage points of GDP since FY11/12.
  • The fiscal deficit remained high, with public expenditure playing a major role.
• Tax Exemptions:
  • Exemptions are a significant source of lost tax revenue, with corporate income tax (CIT) and value added tax (VAT) being the main contributors.
  • Exemptions in CIT were concentrated in a few subsectors, with the financial, manufacturing, health, and social work sectors accounting for 88% of total exemptions.
• Policy Options:
  • Rationalize and streamline tax exemptions to improve revenue collection.
  • Adopt an electronic tax register and improve data accuracy to expand the tax base.
  • Enhance VAT collection by tightening exemptions on domestic supplies and exempt imports.
  • Improve compliance and tax administration to ensure better revenue performance.

Conclusion

• The report calls for a balanced approach to fiscal consolidation, emphasizing both expenditure control and revenue enhancement.
• Structural reforms in the public investment and state-owned enterprise sectors are crucial for long-term growth.
• Private sector engagement in infrastructure development and credit expansion is essential to support Vision 2030.
• Climate-proofing agriculture through the adoption of drought-tolerant seeds and improved water management is necessary to mitigate weather-related risks.
• The World Bank remains committed to supporting Kenya's economic development through policy dialogue and collaboration with key stakeholders.

Key Figures and Data

• GDP Growth: 4.8% in H1 2017, projected to rebound to 5.5% in 2018 and 5.9% in 2019.
• Private Sector Credit Growth: Fell from 25% in mid-2014 to 1.6% in August 2017.
• Fiscal Deficit: Increased in FY16/17, remaining well above other EAC countries.
• Inflation: Peaked in H1 2017 at 7.5%, then declined to the target range.
• Non-Performing Loans (NPLs): Continued to rise across sectors, with the private sector being particularly affected.

Policy Recommendations

• Remove the interest rate cap to improve credit access and monetary policy effectiveness.
• Rationalize tax exemptions to enhance revenue mobilization.
• Implement structural reforms to improve public investment efficiency and support private sector participation.
• Strengthen financial inclusion and consumer protection through improved credit systems and financial literacy programs.
• Climate-proof agriculture to ensure resilience against adverse weather conditions.