Good news: a “re-basing” of the way in which Kenya’s Gross Domestic Product (GDP) is calculated means that the country’s economy is officially 25 per cent bigger today than it was yesterday under the old method of adding up the nation’s wealth. Bad news: because politicians and officials of various political colours didn’t get their act together over the last five years a major part of Kenya’s economy has been dealt a massive blow.
KENYA RISES IN LEAGUE OF AFRICAN ECONOMIES
The results of the new way of calculating Kenya’s GDP announced yesterday by the Kenya National Bureau of Statistics, known as “re-basing” (changing the base year against which GDP growth is compared) has led to a revision of the country’s earning power (the total value of national production) from the previous figure for 2013 0f Sh3.8 trillion to Sh4.75 trillion ($53.2 billion).
Officially Kenya has jumped four place in the GDP league table for Africa, overtaking at a stroke of a pen or two, Ethiopia, Tunisia and Ghana, from 13th to ninth place. Internationally Kenya has risen 10 places in the global table from 87th to 77th, surpassing overnight the economies of Guatemala, Bulgaria, Costa Rica and Lebanon.
“LOWER MIDDLE-INCOME” ECONOMY
Kenya is therefore now a lower middle-income country as GDP per Kenyan has been re-calculated at Sh116,037 ($1,246) per year, passing the $1,045 mark set by the World Bank to achieve lower middle-income status.
So, are you feeling richer this morning? Of course you are not and indeed you are not personally financially better off than you were yesterday but if the new figures are the result of a more accurate way of determining Kenya’s real economic output and hence help improve economic planning, the Kenya Forum welcomes them.
MEANWHILE… KENYA’S HORTICULTURE DOWN THE PAN
Kenya’s new economic rating made the front page of today’s Daily Nation and Business Daily. It was left to the inside ‘Business’ pages of the Daily Nation to report a possibly more significant piece of economic news, the ramifications of which will be felt by Kenya’s economy and by ordinary Kenyans in terms of loss of jobs and falling wages.
EUROPEAN UNION IMPORT DUTIES
As of today Kenya’s exports to the European Union of flowers, fruit and vegetables, a business that is worth multi billions of shillings a year to the country’s economy, will now cost overseas buyers in the EU considerably more because of the imposition of import duties.
As of 1st October, 60 per cent of Kenya’s exports to Europe which had been ‘zero-rated’, i.e., had no tariffs to pay on entering the EU, will be subject to various levels of import duty as a result of the 30 year-old Economic Partnership Agreement with the EU coming to an end.
Cut flowers, for example, a Sh7 billion a year business employing thousands of people, will now be loaded by a tariff of 8.5 per cent. Fish exported from Kenya will cost six per cent more: fruit juices 11.7 per cent; and fruit and vegetables 15 per cent more.
KENYA WILL LOSE OUT
Trade agreements come to an end but in this instance the Government of Kenya, both this administration and the last, were warned time and again over the last five years to reach agreement with the EU but it just didn’t happen.
Ethiopia on the other hand, will not be subject to the new import duties. So where do you think European buyers, operating in a very tight business environment, are now going to go for their fruit, vegetables and flowers?
This massive blow to the Kenyan economy and the livelihoods of tens of thousands of Kenyans (at least in the short-to-medium term until hopefully a new agreement is reached) need not have and should not have happened. Urgent action is required.