Aspects of Kenya Economy

Words: 854
Topic: Business & Economics

Kenya is a country that is located in the East African region. It borders Uganda to its west, Somalia to the east, Ethiopia to the north, Tanzania to the south and the Indian Ocean along its southeastern coast. It has a population of approximately 40 million people, according to the 2009 national population census. The majority of people live in rural areas and, therefore, agriculture forms the main economic activity. The major exports from Kenya are agricultural products such as tea, coffee, horticultural products, among others.

Economic growth can be defined as an increase in the capacity of production of goods and services in a country over a given period, for instance, one year. Economic growth is measured in terms of a percent change in real Gross Domestic Product (GDP) or Gross National Product (GNP).

This measure is then corrected for the inflation rate to reflect the true percentage change as inflation affects GDP. GDP accounts for all the goods produced by the citizens of a country including those in the Diaspora while GNP includes the market value of the goods and services produced by the citizens excluding those in Diaspora (Bell et al. 78).

The study of Economic growth in Kenya is important because there has been a constant rising and falling of the economic growth estimates in the country over a long period. Therefore, a more serious course of action is required to maintain a stable economic growth of the country by correcting the aspects that are bringing in the fall in its growth. This paper will track down the estimates of the economic growth rate in Kenya and probably make a better policy recommendation.

According to Odhiambo, (708), Kenya’s economic growth rate in terms of GDP in 1980 was 5.572%. It stabilized around that figure before dropping to 1.593% in 1983. By the end of 1986, it had again increased to 6.982% the second highest level from then to date.

It stabilized around that figure for the next two years before dropping to -1.08% in 1992. This huge drop could be attributed to changes in the political arena from a single party country to multi-party democratic country that took effect in 1992 elections. During this moment, even the inflation rate recorded the highest value.

From the huge drop in 1992, the economy began to boom again since the political temperatures in the country cooled down, but then rose up to 4.287% in 1995 (Ellis 148). Again, the political heat began to rise due to the 1997 elections, which led to a drop in the economic growth rate to 4.011% in 1996 and 0.22% in 1997.

Between 1998 and 2002, the growth rate kept on fluctuating widely without any stable growth. In 2002, the next election year, the growth rate was estimated at 0.299%. During this year’s elections, there was a change of government from KANU, which had been in government since independence in 1963 to NARC, a merger of key opposition parties (Ndulu 220).

From the year 2003, there was a fast, stable economic growth up to 2007, where the highest figure was recorded at 6.993% (Ndulu 220). This was another election year in which tribal clashes broke out after elections in December causing a huge drop in the growth rate to 1.528% in 2008. From 2009 to 2010, the growth rate was slow, but stable reaching 5.552% in 2010. It has also been reported to have expanded by 0.7% in the first quarter of the year 2011.

The Kenyan political economy is characterized by a centralized form of governance. Governance decisions are done from a central point, and then they trickle down to the citizens through the provincial administration or local government.

The government budget is made by the ministry of finance and funds are divided into various ministries in the government for the implementation of projects. However, the new constitution passed in the year 2010 referendum may bring changes in governance once it is fully implemented after the next election as it proposes decentralized governance by use of county governments.

In conclusion, we find that Kenya’s economic growth rate has been very unstable and unidirectional. It is also highly affected by the politics of the country as the political pillar has been very fragile. Since independence, the highest ever recorded growth rate was in 1971 rated at 22.2% while the least was in 1970 rated at -4.7% (World Bank 9).

In recommendation, the Kenyan government should try to separate politics from economic development or come up with better political policies to control the extreme effects that politics causes to the economy.

Works cited

Bell, Clive, Ramona Bruhns, Hans Gersbach and World Bank. Economic growth, education, and AIDS in Kenya: a long-run analysis. Washington, DC. World Bank Publications. 2006. Print.

Ellis, Amanda. Gender and Economic Growth in Kenya: Unleashing the Power of Women. Washington, DC: World Bank Publications, 2007. Print.

Ndulu, Benno. The Political Economy of Economic Growth in Africa, 1960-2000, Volume 2. New York: Cambridge University Press, 2008. Print.

Odhiambo, Nicholas. Financial depth, savings and economic growth in Kenya: A dynamic causal linkage. Economic Modelling. 25(4). Pp. 704–713. Print.