High growth and resilience through shocks


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GDP USD 60.94bn (World ranking 74, World Bank 2014)
Population 45.55 mn (World ranking 30, World Bank 2014)
Form of state Republic
Head of government Uhuru Kenyatta
Next elections 2018, presidential and legislative
  • Large domestic market (population 45mn and member of a regional trading bloc, East African Community, which is expanding and offering good business opportunities.
  • Vibrant horticultural and tourism sectors, although the latter is volatile, subject to domestic political stability and regional security concerns.
  • Regional energy sector has significant potential (including offshore gas fields), with direct (exploitable reserves within Kenya’s territory) and indirect (inputs through Kenyan ports and exports from them) benefits.
  • Strategic importance: regional economic hub.
  • Poor record in terms of political party and individual rivalries and ethnic, tribal and religious divides, which spilled over into violence in 2008. Despite a relatively successful election process in March 2013, these fault lines remain in place.
  • Regional uncertainties (including Somalia, piracy and terrorist activity).
  • Classified as a lower-middle income economy by the World Bank, with associated need to maintain aid and other external assistance flows.
  • Chequered relationship with the IFIs and wider donor community, partly reflecting perceptions of corruption.
  • Twin deficits in fiscal and current accounts.

The growth trajectory was marginally affected despite sizeable headwinds

Kenya experienced two major difficulties in 2018. Poor rains affected agricultural production, the main Kenyan output and export’s sector. It nurtured some discontent in the country just before the Presidential election. The electoral process was particularly bumpy since the first election results were cancelled and a new election was organized. However, after some weeks of tensions, the divide was resolved in a consensual way.

After all, GDP growth decelerated only marginally to +4.9% in 2018 (+5.9% in 2017). Now, that all the stars are again aligned, GDP growth recovered to +6.2% in 2018 and should hold on in 2019 (+5.7%). Kenya is also among African economies where mobile payments are developing the most. It reached 8.7% of GDP in 2017, and as of November 2018 60% of the population was able to pay through their devices.

Policy management reduced sustainability risks

The policy-mix is adding to this virtuous circle, since inflation decreased to +4.5% in 2018, allowing monetary policy easing and helping the Central Bank to stabilize the exchange rate, without too many difficulties. Moreover, the government was able to reduce the level of the fiscal deficit to -6.7% of GDP in 2018, and effort that should continue by 2020 (-5.7% of GDP is expected).

This quite good policy management also helped Kenya to secure IMF backing without any need to disburse the funding (the stand-by arrangement was treated as precautionary), since private capital inflows were flowing in. As a result, FX liquidity is now quite comfortable, with FX reserves at 7 months of imports. After a 6-months extension of the IMF backing from March 2018 to September 2018, Kenya seems now able to live without it.

External debt is not the main issue, since debt due only represents about 30% of FX reserves, and external debt is contained at 32.5% of GDP in 2018. Public debt grew somewhat during the last years, from 51.6% of GDP in 2015 to 56% of GDP in 2018, but is now expected to stabilize to 54.5% of GDP by 2020.

More reforms and more openness to trade to drive future growth

Euler Hermes expects the East African Community (EAC) will grow in importance for Kenya as regional integration deepens, particularly as Mombassa remains the largest regional port and Uganda and Tanzania already account for a combined 23% of Kenyan exports. However, in addition to large fiscal deficits, a further structural imbalance occurs in the external accounts. Large shortfalls in the current account balance (see chart) reflect the economy’s vulnerability to local (climatic and security) and global developments. The latter include commodity demand and internationally-determined commodity prices, which have an impact on both sides of the trade balance as Kenya exports soft commodities but is an importer of crude oil.

The World Bank Doing Business 2019 survey ranks Kenya 61 out of 190 countries, an improvement of 68 places from the 2015 survey. Structural strengths were based on credit availability and contract enforcement. From that, reforms helped to ease tax payments and insolvencies resolution (57th, one of the best worldwide ranking for an African economy on this item). Along with investments, these reforms also helped to improve the access to electricity.

In terms of ease of doing business, investments in its connectivity ability, size of the market and geographical position, Kenya is now well positioned to become a financial and trade hub. As a result, the country is increasingly supportive of regional integration: the African Continental Free Trade Area signed in Kigali in March 2018, but also the Tripartite Free Trade Area (planning a FTA from in East and Southern Africa, from Egypt to South Africa). As a result, we calculated a potential for USD 16bn of export gains by 2030, from the 2018 estimated USD 6bn level.

Trade structure by destination/origin

(% of total)

Exports Rank Imports
Uganda 10%
24% China
Tanzania 9%
11% India
United States 8%
7% United Arab Emirates
Netherlands 7%
5% Japan
United Kingdom 7%
4% South Africa

Trade structure by product

(% of total)

Exports Rank Imports
Coffee, tea, cocoa, spices, and manufactures thereof 25%
14% Petroleum, petroleum products and related materials
Crude animal and vegetable materials, n.e.s. 11%
9% Road vehicles
Vegetables and fruits 9%
5% Textile yarn and related products
Articles of apparel & clothing accessories 6%
4% Telecommunication and sound recording apparatus
Miscellaneous manufactured articles, n.e.s. 4%
4% Iron and steel

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings


Contact Euler Hermes

Economic Research Team

Contact Stéphane Colliac

Senior Economist for France and Africa 

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