Kafrican
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Economists raise concern that Kenya's official GDP figures may be cooked!
Economists raise concern that Kenya's official GDP figures may be cooked!
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Iconoclastes
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Here is John Ashbourne's and Charles Robertson's perspective on the Kenya's economy late last yr, both from the Capital Economics as carried by the FT...
FEBRUARY 4, 2016 by: Steve Johnson
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Looking for a winner from the oil price slump? Kenya could well be a prime candidate, in the emerging world at least.
The rout has claimed a swath of well-documented victims, from recession-hit Brazil, Russia and Venezuela to the badly holed Nigeria and Azerbaijan and the challenged Gulf states.
However Kenya — with a rapidly falling current account deficit, its first quarterly budget surplus for at least five years and solid economic growth — could be one of the less heralded beneficiaries of the crash in energy prices.
“Kenya is one of the few large African economies that is likely to perform well in 2016. As a net energy importer, it will continue to benefit from low oil prices this year,” says John Ashbourne, Africa economist at Capital Economics.
Charles Robertson, chief global economist at Renaissance Capital, who met officials in Nairobi in January, lauds the 45m-strong country’s “remarkable” improvement in government finances.
Much of the credit can be laid at the door of the tumbling oil price. Between 2011 and 2015, Kenya’s annual fossil fuel import bill was running at about Ks350bn ($3.4bn at the current exchange rate). With oil at $30 a barrel, this could drop to Ks115bn in 2016, according to calculations by Mr Robertson, based on central bank figures.
This is equivalent to a decline from 7 per cent of gross domestic product in 2013 to 4.1 per cent in 2015 and potentially as little as 1.6 per cent in 2015.
“Oil and fuel accounted for 12 per cent of imports in September, compared to a quarter or a third a few years ago. That’s a huge saving,” says Mr Ashbourne.
Sliding energy prices helped fuel a 13 per cent year-on-year fall in Kenya’s total import bill in September. In contrast, exports rose 24 per cent year on year in shilling terms, largely thanks, apparently, to a 58 per cent jump in the value of tea exports as prices rose, says Mr Ashbourne.
This represents a sharp turnround from previous years, when imports were typically rising faster than exports, as the first chart shows.
As a result, Kenya’s current account deficit fell to a five-year low of 5.4 per cent of GDP in the third quarter of 2015, from almost 9 per cent three months earlier.
Renaissance Capital estimates that the full-year deficit for 2015 will come in at about 7.6 per cent of GDP, compared with quarterly deficits as high as 15 per cent in 2014.
This has been achieved despite a fall in tourism revenues in the wake of the terrorist attack on Nairobi’s Westgate shopping mall in September 2014, which left 67 people dead, and a subsequent string of deadly attacks in the capital and elsewhere.
Even in the unlikely event that oil prices were to surge back to their 2014 highs, Kenya should still be better protected than in the past.
The country has used its position in the seismically active Rift Valley to increase its geothermal energy output to more than 300m kWh a year, accounting for 50 per cent of electricity production, up from 20 per cent two years ago, according to Capital Economics.
“It’s clever, they are using their own natural resources to good effect and it happens to be green energy as well, so it ticks a lot of boxes,” says Mr Robertson.
With wind power also expanding fast, “Kenya is really ahead of the curve in renewable power”, says Mr Ashbourne, who speculates that only Iceland may generate a higher proportion of its energy from geothermal power.
Kenya’s finance ministry has also used the fall in the oil price to raise the excise tax on petrol, “so consumers don’t hiss but the Treasury successfully plucks some tax revenues”, says Mr Robertson.
Partly as a result, he estimates the budget deficit fell from 11 per cent of GDP in the 12 months to March 2015 to 8 per cent by September, adding that “a 3 percentage point improvement would be impressive in any country. To achieve it in six months is remarkable, in our view.”
Indeed, in the third quarter the budget balance actually turned positive for the first time in at least five years, as the second chart shows.
Moreover, a supplementary budget later this month is likely to cut the deficit still further, despite elections being just a year away.
One criticism may be that this further reduction may be largely achieved by cutting planned spending on infrastructure projects that have not yet started.
But Mr Robertson says “any ability to send a signal to the outside world, and the credit rating agencies, that Kenya is still targeting a smaller deficit is a positive”.
Economic growth is also on the up, hitting 5.8 per cent year on year in the three months to September 2015, according to data from Trading Economics, up from 4.9 per cent six months earlier and a low of 2.9 per cent in January 2014.
Mr Robertson is cautious about the future path of GDP growth however, given the low tourism receipts, rising interest rates, tighter fiscal policy, higher taxes on cigarettes and alcohol (as well as petrol) and the probable cessation of any investment in an oil discovery in Lake Turkana, in the north of the country, the economics of which he says would be “questionable” even at $70 oil.
However Mr Ashbourne says growth of 6 to 6.5 per cent this year would be “quite good” given that “Africa as a whole is slowing down to about 3 per cent”.
Instead, he has some concerns that Kenya still has a current account deficit of 5.4 per cent of GDP “even with the stars aligning” for the country.
However, he points out that machinery and transport equipment currently accounts for 36 per cent of Kenya’s imports. Although this will include products such as cars, it will also include machinery being used to build a railway between Nairobi and the port city of Mombasa.
Given that this line should unlock significant transportation bottlenecks, he argues that spending on it should be seen as investment rather than consumption.
Mr Robertson says he was told by a Kenyan government official that a significant current account deficit was “normal” given 6 per cent GDP growth and Kenya’s spending on infrastructure, which includes improving the road network and electricity supply, as well as building the railway.
He estimates that the rail project, financed by Chinese loans being spent on construction-related Chinese imports, is adding about 2 percentage points of GDP to the current account deficit.
A separate concern is Kenya’s worsening drought, given that agricultural products such as tea, coffee and fresh flowers are among the country’s leading exports, and that it is a significant generator of hydroelectricity.
Nevertheless, the shilling has been remarkably stable this year (without the need for capital controls to achieve this), admittedly after having fallen 11 per cent against the dollar in 2014.
Foreign exchange reserves have risen 12 per cent during the past three months and the Kenyan stock market has significantly outperformed other frontier markets in recent years, as the final chart shows.
Given the turbulence elsewhere in the emerging world, matters could be much worse.
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Kenya a rare bright spot in emerging markets gloom
Jay456watt
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kama hiyo ni ukweli basi yenu ni kati ya 20Bil to 25 Bil.. bado tuko mbele...na mtaendelea kusoma hio namba milele...hatuko hapa kuwa namba two...we are here to be number one...
Synod
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Safi sana! Leo unaikana mitandao yenu kisa imeanika uchafu wenu!
Hivyo ukubali pale ulipoambiwa kuwa hatuamini habari za umeme ulizokuwa unaleta zilizoandikwa na magazeti ya Kenya na wewe unasimama kidete kuyatetea!
Iconoclastes
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Kama ingekuwa ni habari ya jarida ya kutajika kama Citizen ama Nation ama Standard nk, ningeyaamini. Lakini mimi sijawahi kusikia hii inajiita Kenya WS.
According to the Kenya WS, John Ashbourne from the CE is quoted as saying that the Kenya economic performance is too good to be true, yet in that other report I have presented up there, the same Ashbourne and his collegue from the CE are talking about the Kenyan economic performance in very glowing terms, and are very sanguine about its future prospects!
*****
Zile habari za umeme nilipachika sources za kutajika both from Kenya and the non Kenyan sources. Tangu lini ukapinga ripoti za Reuters ama AllAfrica?
You know me, I never present info from some obscure, crackpot blogsites in defending my arguments.
If u wanted sth from the WB and the likes, why dont u search for the very latest electricity access indices from them?
You can scour the internet for the 2015/16 WB list, it doesnt exist cos they havent released the latest reports.
But I think this AfDB report would suffice....
AfDB loan to provide power to 1.5 million Kenyans
Cicero
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Wewe....angalia hiyo chart vizuri. Among Africa's large economies, Tanzania's statistical capacity is second best, just behind South Africa's. Our national bureau of statistics is competent.....sio kama hio ya kwenu. We give true data!
Cicero
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Very soon watajikuta na deni wasiloweza kulipa. They are playing the game Greece played. Hii itakuwa hatari sana when the EAC monetary union is formed. Watakuwa wanadanganya GDP yao na debt levels. Before we know it we are forced to pay their debts!
Cicero
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Imagine if you guys are cooking data this early, vipi je when the EAC monetary union is formed? You guys will be our very own Greece. Lying about GDP figures, inflation and debt levels mkisahau kwamba za mwizi ni 40. I dont think anyone in EAC will be willing to bail you out!
Synod
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Kama hujawahi kusikia ndo fursa yako kusikia hivyo, just like the first time you heard abt hayo magazeti mengine ulotaja!
Btw, allafrica hawaandiki habari wao wenyewe, mara zote huwa wana summarize habari kutoka magazeti mengine! Hapa tz hupenda kuchukua habari zao kutoka The Guadian na the citizen! Na Kenya wanachukua magazeti ya hapo same applies kwa nchi nyingine!
Hivyo kwenye report ambazo zinahitaji statistics zio za kuleta porojo
Livale
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Ndio ujue this article is poor bollocks, io hio Mozambique ina the 3rd best statistical capacity.
Iconoclastes
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I know that AllAfrica aggregate their stories from the other newssites, but only from the most credible sources, only postinf the stories after counterchecking the credibility of the news with other sources.
And btw, nyinyi kwanza tangu lini mkaamini sources zingine kama si zile za CCM?
Hata WB, IMF, Wfp na kadhalika huwa mnazitaja kama propaganda za wazungu, vipi tena leo?
Haya, hebu pinga basi hiyo ripoti ya AfDB. Ama pia ilihongwa na Kenya na Geza alidai wakati mmoja?
Emc2
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Do you know the different of statistical information and magazine news!?
Hapa tunaongelea statistics wewe unaleta breaking news. Wapi na wapi.
Statistics involves lot of investments. Data collection and correction. Data analysis, data maping, Professional Questionnaires, Diagrams and Graphs.
Sasa wewe unaleta news, vitu ambavyo havijafanyiwa research. News is just information to inform citizens at that time and can be corrected without doing research.
Upo dogo!?
Iconoclastes
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Who said that our figures are cooked?
Mwanzi1
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Kabla ya kufika huko kwenye monetary Union, fresh audit will have to be conducted. Tatizo Kenya has borrowed so much in past five years kuliko nchi yoyote in EAC, kutu ambacho kina jeopardise the whole idea of single currency.
Mwanzi1
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The jury is still out, KE finance CS haven't come out and refute this information.Ndio ujue this article is poor bollocks, io hio Mozambique ina the 3rd best statistical capacity.