Highlights of the Kenya Economic Survey 2021

The Kenya National Bureau of Statistics (KNBS) on Thursday, September 2021, released the annual Economic Survey 2021 after a four-month delay.

Normally the survey report that shows the performance of job markets and the economy is released before the July 1 budget reading in early May or late April.

KNBS said the delay was in part attributed to late data submissions by respondents in various sectors of the economy. 

Highlights of the Economic Survey 2021

Kenya’s GDP contracted by 0.3% in 2020 from 5% in 2019 owing to the destabilisng effects of the Covid-19 pandemic.

Accommodation and food serving activities, education, professional and administrative service activities recorded significant declines in 2020.  

The economy was somewhat supported by accelerated growths in agricultural production, construction activities, and health services. 

Comparatively, the Global Economy contracted by 4.2 % in 2020 compared to a growth of 2.7% in 2019 due to Covid-19 effects on business and a significant decline in oil prices as a result of dwindling demand.

Economies in the OECD contracted by 5.5% in 2020 compared to a growth of 1.6% in 2019 while Sub-Saharan African Real GDP contracted by 1.9 % in 2020 compared to 3.2% growth in 2019. GDP jumped to Ksh10.75 trillion after rebasing of the economy to 2016 base year from 2009.

The economy is projected to grow by 6% in 2021 helped by the manufacturing sector.

Performance by Sector

1. Agriculture 

• Growth accelerated to 4.8% as a result of increased production of tea and food crops.
• Value of marketed products increased to Ksh509.7 billion

2. Manufacturing

• Contracted by 0.1% compared to a 2.5% growth in 2019.
• Performance mainly supported by sugar and cement production.
• Growth in EPZ sales by 4.3% to Ksh80.5 billion from Ksh77.2 billion in 2019
• Credit advance rose by 11.8% to Ksh410.3 billion.
• Decrease in formal employment by 10.3%. 

3. Construction Sector

• The construction sector recorded a growth of 11.8% in 2020 compared to a 5.6% growth in 2019. 
• The length of paved road as at 30th June 2020 was 22,649Km compared to 21,295Km in June 2019.
• Cement consumption which is a key input to the sector increased by 20.3% in 2020. 
  

4. Energy Sector

• Electricity supply GVA contracted by 0.5 % in 2020 compared to 1.7 % growth in 2019.
• Electricity generated increased by 17.1 % to 11.6 million Megawatt hours in 2020
• The total value of petroleum products imported dropped by 33.9% to Ksh 209.1 billion in 2020 from Ksh 316.6 billion in 2019.
• Key projects: 

             - Completion of Olkaria V Geothermal power plant with an installed capacity of 172.3 MW 

             - Ongoing development of the Gitaru Solar Power plant with an estimated capacity of 42.5 MW 

5. Finance Sector

• Financial sector recorded a growth of 5.6% in 2020 compared to a growth of 6.9% in 2019
• Total domestic credit grew by 18.6 % in Dec 2020
• Credit to the National Government increased to Ksh 1,358.4 billion as at Dec 2020 compared to Ksh 900.4 billion in Dec 2019.
• Credit to the private sector expanded by 8.4% to Ksh 2,891.3 billion in 2020

6. Public Finance

• Total expenditure stood at Ksh 2,947.6 billion in 2019/20 compared to Ksh 2,944.8 billion in 2018/19
• Recurrent account dropped by 1.5% in 2019/20 while development expenditure increased from Ksh 569.7 billion in 2018/19 to Ksh 608.5 billion in 2019/20.
• Development expenditure accounted for 26.0% of total expenditure in 2019/20
• Total expenditure by County Governments rose from Ksh 405.5 billion in 2018/19 to Ksh 417.2 billion in 2019/20
• County Government expenditure on compensation of employees rose from Ksh 155.8 billion in 2018/19 to 167.3 billion in 2019/20.

7. Employment

• Total employment outside small scale agriculture and pastoralist activities contracted by 4.1% to 17.4 million in 2020.
• 83% of recorded employment in 2020 was in the informal sector
• A total of 2.9 million jobs were reported in the formal sector in 2020
  

8. Consumer Prices 

• Inflation rose from 5.3% in 2019 to 5.4% in 2020. 
• Covid-19 containment measures lead to supply chain disruptions that consequently lead to price increases mainly in the transportation sector
  

9. Tourism Sector

• The number of international arrivals declined by 71.5 % to 579.6 thousand in 2020 
• Tourism earnings declined by 43.9 % to Ksh 91.7 billion in 2020
• Hotel Bed-night occupancy contracted by 58.0 % to 3,803.3 thousand in 2020.
  

10. International Trade

• Volume of trade dropped to Ksh2.29 trillion in 2020.

• Out of this, the value of imports were Ksh1.64 trillion while that of total exports were Ksh0.64 trillion 
  

ECONOMIC OUTLOOK

Global 

Globally, most of the developing economies are projected to experience a more challenging recovery from the COVID-19 pandemic compared to their developed economies counterpart. 

This is largely so because of the uneven access to COVID-19 vaccine which is therefore likely to negatively impact the full resumption of economic activities in the developing economies. ]

The global economic growth is expected to rebound to 5.6 % in 2021. • Consequently, the volume of world merchandise trade is projected to expand by 8.0 % in 2021 after a contraction of 5.3 % in 2020. 

The growth in world trade is expected to boost external demand for Kenya’s products and thereby likely to augment the country’s economic growth.

Domestic

Domestically, oil prices have been rising significantly in response to the global price rise.  On average, the international oil prices are likely to be higher. 

Effectively then, oil prices in Kenya will probably remain high and therefore counterproductive to economic growth.  

On average, inflation was lower in the first quarter of 2021 compared to a similar quarter of 2020. 

However, there was a significant rise in the inflation rate during the second quarter and it is likely that this trend will continue in the second half of 2021 partly due to higher energy and transportation prices. 

The country has so far experienced below normal rainfall in the first half of 2021.  However, the weather forecast points to the possibility of the short rains being better in most parts of the country later in the year.  

Output of the agriculture sector, which is largely rain fed, is therefore likely to be lower than the 2020 level.  

Full resumption of activities in the education sector and the hotel industry, which were almost halted for the better part of 2020, is likely to significantly boost the growth.  

Other key sectors like manufacturing and transportation are likely to rebound and support the country’s economic growth.  

The key macroeconomic indicators will most probably remain stable and supportive of growth in 2021, the economy is therefore expected to record a significant rebound in 2021.

Other Sectors in Detail

Below is an excerpt from Treasury and Planning Cabinet Secretary Ukur Yatani’s speech during the launch of the 2021 Economic Survey Report.

Transport and Storage

In 2020, the sector performance was constrained by the COVID-19 pandemic containment measures including restriction of movement between countries and counties, social distance in public service vehicles and arrangements of working remotely.

The sector contracted by 7.8 % compared to a 6.3 % growth in 2019.

The freight transport through the Standard Gauge Railway (SGR) increased from 4,159 thousand tonnes in 2019 to 4,418 thousand tonnes in 2020.

Revenue generated from railway transport declined from Sh15,860 million in 2019 to Sh12,552 million in 2020.

Total cargo throughput at the Port of Mombasa remained more or less at the same level as 2019 recording a minimal decline of 0.9 % to stand at 34,116 thousand metric tonnes in 2020

The contraction in growth was reflected in decline in consumption of light diesel by 3.0 % to stand at 2,143.5 thousand metric tonnes in 2020.]

Commercial passenger traffic by air declined by 62.5 % from 12.0 million in 2019 to 4.5 million in 2020.

The number of newly registered motor vehicles declined by 14.2 % from 109,751 in 2019 to 94,128 to 2020.

Information and Communication Technology

The Information and Communication sector registered a growth of 4.8 % in 2020 compared to 7.5 % in 2019. This growth was mainly supported by increased uptake of digital services as the COVID-19 measures advocated for learning activities to be undertaken remotely and cashless payments for financial transactions.

The total number of mobile money and commerce transactions increased by 20.0 % and 35 % to stand at Sh5.2 trillion and Sh9.4 billion , respectively in 2020.

Internet service providers increased from 302 in 2019 to 366 in 2020 while internet subscriptions increased by 11.7 % to 44.4 million over the same period.

Education and Training

Total number of schools increased from 89,337 in 2019 to 90,145 in 2020.

The number of registered public pre-primary schools went up by 2.7 % from 28,383 in 2019 to 29,148 in 2020. During the review period, the number of private primary schools increased by 1.5 % to 9,191, while the number of public primary schools declined to 23,246 from 23,286 in 2019.

The number of public teacher training colleges grew from 27 in 2019 to 30 in 2020, while the number of national polytechnics increased by one to 12 in 2020.

Enrolment in Pre-Primary 1 and 2 increased by 3.4 % to 2.8 million in 2020 from 2.7 million in 2019.

Total enrolment in primary schools stood at 10.2 million in 2020 from 10.1 million in 2019.

Total enrolment in secondary schools recorded a growth of 8.0 % to 3,520.4 thousand in 2020 of which 1,768.9 thousand were girls.

Enrolment in TVET institutions increased by 4.8 % from 430,598 in 2019 to 451,205 in 2020.

Total enrolment in public and private universities increased by 7.3 % to 546.7 thousand in 2020/21 from 509.5 thousand reported in 2019/20 academic year.

The number of HELB loan applicants recorded a growth of 30.4 % from 298.0 thousand in 2018/19 to 388.7 thousand in 2019/20 academic year. The number of loan beneficiaries increased by 19.1 % from 293.2 thousand in 2018/19 to 349.2 thousand in 2019/20.

Health and Vital Statistics

The National Government expenditure on health services rose by 34.5 % to Sh103.1 billion in 2019/20 while that of County Governments’ grew by 16.0 % to Sh106.7 billion in the same period. The ratio of Government expenditure on health to total expenditure stood at 6.2 % in 2019/20.

The National Hospital Insurance Fund (NHIF) membership increased by 6.0 % to 22.0 million in 2019/20. Consequently, NHIF members’ receipts grew by 5.7 % to Sh59.5 billion in 2019/20. The amount of benefits payout increased by 1.8 % to Sh54.4 billion during the review period.

Total cases of diseases reported in health facilities were about 60.0 million in 2020. Diseases of the respiratory system and malaria accounted for 27.6 % and 19.1 % of the total disease caseload, respectively, in the same period. 

The number of health facilities increased from 13,700 in 2019 to 14,600 in 2020.

Hospital beds increased by 9.6 % to 82,091 while hospital cots increased by 7.7 % to 8,946 in the review period.

Overall Performance of the domestic Economy

The revised nominal GDP was estimated at 10.753 trillion in 2020 from 10.256 trillion in 2019.

The economic performance as measured by Real Gross Domestic Product (GDP) is estimated to have contracted by 0.3 % in 2020 compared to a growth of 5.0 % in 2019.

The contraction in Economic performance was attributed to;

• Disruption in labour supply brought about by restriction of movement and social distancing meant to contain the spread of Covid-19
  

• Reduced demands for goods and services.
  

The large contraction in tourism and related activities was partly offset by growth in the Construction and Health sectors both driven by continued investment in public infrastructure and Health.

The Government is currently focusing on the implementation of the Economic Recovery Strategy (ERS) that aims at restoring the economy to a strong growth path, creating jobs and economic opportunities across all regions of the country with a view to tackling social and income inequalities. It is expected that the successful implementation of the Economic Recovery Strategy which is also aligned to the “Big Four” Agenda will promote inclusive growth and transform the lives of Kenyans.