News / Africa

Possible Trouble Brewing for Kenya's Economic Outlook

Customers wait to place their orders at a Kentucky Fried Chicken [KFC] restaurant at the Nakumat junction in Nairobi, Kenya, August 23, 2011.
Customers wait to place their orders at a Kentucky Fried Chicken [KFC] restaurant at the Nakumat junction in Nairobi, Kenya, August 23, 2011.

In Kenya, World Bank officials are forecasting lower-than-expected growth rates for this year and next due to global shocks that have had big impacts on Kenya’s economy, especially imports. Kenya is being urged to expand its export base as one way to boost growth. Not everyone is worried about Kenya’s economic future, however, including a world famous investor who is setting up a new tourism venture.

Kenya’s imports are proving to be problematic for the country’s economy in two major ways. To begin with, there are disproportionately too many. Wolfgang Fengler, lead economist for the World Bank’s Kenya program, said the current account deficit is at minus 10 percent.

“The current account deficit measures exports minus imports. Because imports are much bigger than exports in Kenya, it is negative. It is more negative than Greece. Fortunately, Kenya doesn’t have the same fiscal problems as Greece,” said Fengler.

Imports, exports

According to U.S. State Department figures, Kenya’s exports in 2010 amounted to almost $5 billion, while the country’s imports were valued at $11.6 billion.

Fengler says Kenya needs to diversify and expand its exports, particularly into the area of manufacturing.

“An economy cannot just succeed on tea and flowers alone. No matter how good Kenya is, it needs other sectors to compete to export,” said Fengler.

Obtaining alernative energy

Another major problem is that oil imports are Kenya’s second-largest expense, normally accounting for 22 percent of the country’s total imports, but now rising to 25 percent due to political instability in the Middle East and North Africa region.

The World Bank’s country director for Kenya, Johannes Zutt, said Kenya is very heavily dependent on emergency diesel generation, and urges the government to tap into alternative energy sources.

“There’s tremendous potential for geothermal energy generation, both at Olkaria, which is a proven field, and then Menengai north of Nakuru, which looks extremely promising, and then also for wind generation at Lake Turkana,” said Zutt.

World Bank observations

The World Bank has forecast lower-than-expected growth rates of 4.3% for 2011, from 4.8%. It says if Kenya manages its risks and follows its two main recommendations to expand exports and alternative energy, then it can expect to recover slightly.

“But 2012 - assuming the shocks are mild, or Kenya will navigate through them successfully as it did two years ago - we project a growth rate of 5.0%, which, however, if these shocks materialize, Kenya will only reach 3.1%,” said Fengler.

The World Bank warns what also could hinder Kenya’s growth rate next year is the continuation or worsening of economic shocks, such as inflation, the value of the shilling [local currency] and the current account deficit.

On the political side, the World Bank notes that an instability arising from Kenya’s 2012 elections also could damage growth. If the country’s new constitution is not properly implemented - especially regarding the devolution of power - it warns growth also will be dampened.

Branson's investment

At least one international investor is not worried, though, about Kenya’s political or economic future.

At the same time the World Bank was giving its forecast, Virgin Airlines founder Richard Branson was in Nairobi addressing a conference on being an entrepreneur.

Richard Branson (C), founder of the Virgin Group of Companies, gestures during a ceremony where he was installed as a Maasai elder in the Maasai Mara national Park, 260 km southwest of Nairobi, Kenya, June 2007. (file photo)
Richard Branson (C), founder of the Virgin Group of Companies, gestures during a ceremony where he was installed as a Maasai elder in the Maasai Mara national Park, 260 km southwest of Nairobi, Kenya, June 2007. (file photo)

Branson - whose Virgin airlines recently began flying into Kenya - announced plans to develop a luxury tented camp and game reserve just outside Masai Mara. He said he thinks Kenya is generally economically and politically stable.

“I’m doing my best to get the word out that 99% of Kenya is safe, and hopefully just by coming here myself, that helps send a good message. We’re slightly worried about one or two government taxes which are being proposed, and which will hit the airline industry further, but we’re determined to make a success of it,” said Branson.

Branson said he thinks the African continent as a whole is growing much faster than Europe or North America, and that with the right leadership, the continent can be as powerful as the Far East.

You May Like

UN: 1 Million Somalis at Risk of Hunger

Group warns region is in dire need of humanitarian aid, with at least 200,000 children under age of five acutely malnourished as drought hits southern, central part of nation More

Human Rights Groups Allege Supression of Freedoms in Thailand

Thailand’s military, police have suppressed release of independent report assessing human rights in kingdom during first 100 days of latest coup More

Jennifer Lawrence Contacts FBI After Nude Photos Hacked

'Silver Linings Playbook' actress' photos were posted on image-sharing forum 4chan; Federal Bureau of Investigations is looking into matter More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Ukraine Schools Resume Classes, Donate to Government Forcesi
X
September 02, 2014 12:58 PM
A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video Ukraine Schools Resume Classes, Donate to Government Forces

A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video US Detainees Want Negotiators for Freedom in North Korea

The three U.S. detainees held in North Korea were permitted to speak with foreign media Monday. The government of Kim Jong Un restricted the topics of the questions, and the interviews in Pyongyang were limited to five minutes. Each of the men asked Washington to send a representative to Pyongyang to secure his release. VOA’s Carolyn Presutti has our story.
Video

Video Internet, Technology Offer New Tools for Journalists

The Internet and rapidly evolving technology is quickly changing how people receive news and how journalists deliver it. There are now more ways to tell a story than ever before. One school in Los Angeles is teaching the next generation of journalists with the help of a state-of-the-art newsroom. Elizabeth Lee has this report.
Video

Video Turkmen From Amerli Describe Survival of IS Siege

Over the past few weeks, hundreds of Shi'ite Turkmen have fled the town of Amerli seeking refuge in the northern city of Kirkuk. Despite recent military gains after U.S. airstrikes that were coordinated with Iraqi and Kurdish forces, the situation remains dire for Amerli’s residents. Sebastian Meyer went to Kirkuk for VOA to speak to those who managed to escape.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.

AppleAndroid