KENYA’S MACROECONOMIC STATUS AND EMERGING BUSINESS OPPORTUNITIES PRESENTATION TO BUSINESS COMMUNITY IN ITALY Henry K. Rotich Cabinet Secretary, The National Treasury, Kenya JULY 18 TH 2013 1
My Presentation will focus on the following: GENERAL MACROECONOMIC STATUS I. Recent economic developments and Outlook KENYA’S DEVELOPMENT AGENDA II. Vision 2030 for a Competitive Kenya: Business Opportunities The Economic Pillar: Six Priority Sectors New Administration: 9-Point Action Plan Key Reforms and enabling Infrastructure to Support the Six Sectors CONCLUSION III. 2
I. General macroeconomic status 3
Recent Economic Developments and Outlook The global economic recovery remains weak with Japan and Europe sliding into recession The Kenyan economy remain resilient with the growth trajectory accelerating towards Vision 2030 target of 10 percent annually. The economy expanded 4.6 percent in 2012 and is projected to grow by 5.6 percent in 2013 rising to 7.0 percent in the medium term. Overall, the macroeconomic environment is generally stable Inflation has been declining Short term interest rates have been stable Lending Rates have been declining Exchange rate has been stable Private sector credit has been rising and channeled to productive sectors of the economy Financial Sector has been vibrant with an expanding banking sector and rising Nairobi Stock Index (NSE) The Public debt remains sustainable 4
Higher growth for employment creation Real GDP (% growth) Economic Growth - strong and 7,0% recovered from the 2008 post election 7,0% violence: peaked to 5.8 percent in 6,3% 5,9% 2010, 4.6 percent in 2012 and 5.2% in 5,8% 6,0% Q1 of 2013 5,2% 5,1% In the last 10 years, massive 5,0% 4,6% 4,4% investments in the modernization and development of the nation’s 4,0% infrastructure especially roads, 2,9% airports, railways, energy and 2,7% 3,0% telecommunications have taken place. Financial sector recorded 2,0% 1,5% impressive growth with access to banking services including those 1,0% 0,5% served by the very successful mobile money transfer service increasing. 0,0% Agriculture is dominant sector 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013 around 20.9 percent of GDP, whole sale and retail 11.0 percent, Transport and Communication 12 percent and Manufacturing around 10 percent 5
Agriculture sector remains dominant and manufacturing picking up…. Agriculture and Manfucturing Agriculture remains a dominant sectors sector. The sector expanded by 8.5 percent in Q1 of 2013 from a low of - 10,0 Agriculture Manufacturing 4.1 percent in 20008. Value addition 8,0 through agro processing is taking Annual Growth Rates centre stage in Agriculture sector. 6,0 4,0 The Government has initiated irrigation programmes through 2,0 construction of dams and will lead to 0,0 less reliance to rain fed agriculture. 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013 -2,0 Manufacturing sector is picking up with a growing market for -4,0 manufactured products in EAC and -6,0 COMESA region. The sector posted a 4.3 percent growth in Q1 of 2013 6
Wholesale and Retail trade sector remains strong.... Whole sale and Retail trade Whole sale and retail sector has remained strong 14,0 registering 6.4 percent annual 12,0 growth in 2012 and 6.2% on Q1 of 2013 Annual Growth rates 10,0 There are large producer 8,0 groups and large whole sale hubs within the country and 6,0 expanding to the regions. 4,0 This is a growing segment 2,0 of our economy and chain stores in Kenya are expanding 0,0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013 to EAC region and demand is still very huge. 7
Transport and communication & Building and Construction Sectors command strong growth…. Transport and Communication Building and Construction 18,0 16,0 16,0 14,0 14,0 12,0 12,0 10,0 10,0 8,0 8,0 6,0 6,0 4,0 4,0 2,0 2,0 0,0 0,0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013 Massive investment in the Communication sector as well as transport through expansion of the road network has led to growth of the sector. Communication as leveraged by ICT has equally registered positive growths over the period. Robust building and construction in the country continues to support the sector growth growing by 13.5 percent in Q1 of 2013. 8
Financial Sector expands & Real Estate remains robust… Kenya has witnessed tremendous growth in the financial services sector. Sector grew by 6.5% in 2012 but slowed in Q1of 2013. Real estate sector grew by 3.3% in 2012 and 3.0% in Q1 of 2013 Financial Intermediation Real Estate 4,5 10,0 4,0 9,0 3,5 8,0 3,0 7,0 2,5 6,0 2,0 5,0 1,5 4,0 1,0 3,0 2,0 0,5 1,0 0,0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013 0,0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013 9
Inflation and money supply declines as monetary policy is tightened…… 22,0 28,0 Overall Inflation Non-food non-fuel inflation M3 growth M3 annual growth rate (%) 20,0 26,0 18,0 Inflation rates( %) 24,0 16,0 22,0 14,0 20,0 12,0 10,0 18,0 8,0 16,0 6,0 14,0 4,0 12,0 2,0 0,0 10,0 gen-10 mar-10 mag-10 lug-10 set-10 nov-10 gen-11 mar-11 mag-11 lug-11 set-11 nov-11 gen-12 mar-12 mag-12 lug-12 set-12 nov-12 gen-13 mar-13 mag-13 Inflation declined to 4.9 percent below the 5 percent target due to improved food supplies, stable oil prices, tight monetary policy, and stable exchange rate Money supply declines to target at 16.7 percent in May 2013 10
Exchange Rate has been stable 180,000 The Kenya Shilling exchange Ksh/US$ Ksh/GBP Ksh/Euro rate has been stable against 160,000 major world currencies (at around Ksh 85 to the dollar 140,000 supported by: Increased capital inflows 120,000 Reduced inflationary expectations (with easing of 100,000 food and oil prices), 80,000 Increased diaspora remittances (that increased 60,000 to US$ 1,193 million in the 30-nov-10 31-gen-11 31-mar-11 31-mag-11 31-lug-11 30-set-11 30-nov-11 31-gen-12 31-mar-12 31-mag-12 31-lug-12 30-set-12 30-nov-12 31-gen-13 31-mar-13 year to May 2013 from US$ 1,053 million in the year to May 2012) and IMF disbursements under the Extended Credit Facility . 11
Overall Balance of Payments in Surplus, Capital inflows increase…… Overall BoP, Current account and Capital and Overall BOP in Surplus Financial Account (2.25 percent of GDP 13.77 14 Current Account has 10 been widening due to 6 increased imports for oil, Percent of GDP Machinery and equipment 2.25 2 for intermediate production May-01 Mar-02 Jan-03 Jun-03 Nov-03 May-06 Mar-07 Jan-08 Jun-08 Nov-08 May-11 Mar-12 Jan-13 Oct-01 Aug-02 Apr-04 Sep-04 Feb-05 Jul-05 Dec-05 Oct-06 Aug-07 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 Oct-11 Aug-12 -2 Imports for Oil and Gas exploration have been -6 rising -10 -14 -11.52 Capital & Financial Account Overall Balance Current Account 12
Foreign Exchange Reserves increased…. Official Foreign Reserves Official reserves increased to US$ 6,123 million 7.000 5,5 (equivalent to 4.5 months 5,0 6.000 of import cover) in June 4,5 2013. 5.000 4,0 US$ million The accumulation of 4.000 (Months) 3,5 reserves during the period 3,0 3.000 consisted of IMF 2,5 2.000 disbursements under the 2,0 Extended Credit Facility 1.000 1,5 financing and build up of - 1,0 reserves from the foreign 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 apr-13 mag-13 exchange market by the Official reserves (LHS) Months of import cover Central Bank 13
Short term and lending interest rates decline in line with reduction in Central Bank Rate (CBR) …. 35,00 Interbank rate CBR 30,00 25,00 20,00 15,00 10,00 5,00 0,00 1-Jul-10 1-Sep-10 1-Nov-10 1-Jan-11 1-Mar-11 1-May-11 1-Jul-11 1-Sep-11 1-Nov-11 1-Jan-12 1-Mar-12 1-May-12 1-Jul-12 1-Sep-12 1-Nov-12 1-Jan-13 1-Mar-13 1-May-13 14
Looking ahead, Kenya’s growth prospects are favorable in line with Vision 2013 Blue Print….. Real GDP growth is projected to expand by 5.6 percent in 2013 and rise to 7%-10% over the medium-term in line with Vision 2013 targets. Driving Factors for this outlook will be : Favourable weather conditions that will boost agricultural production and expanded irrigation in the arid and semi arid areas. Target this Fiscal year is to irrigate over one million acreage of land Key infrastructural projects (in roads and energy) some that are on going as well as additional investment in the a cargo and commuter trains Stable macroeconomic environment (low inflation, and stable interest rates and exchange rate and sustainable debt levels) Structural reforms targeted to improving competitiveness of the private sector and promoting overall productivity in the economy. Expanded exports in the EAC, COMESA and European markets supported by the relatively strong economic growth in the sub 15 region. Kenya will adopt deliberate measures to market its exports
Kenya’s Development II. Agenda 16
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