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An upward revision of Kenya’s economic output shows that the country’s economic reforms are paying off, with the potential for future growth to exceed 6 per cent a year, an International Monetary Fund (IMF) official has said.
Kenya announced on Tuesday that last year’s Gross Domestic Product (GDP) was $53.4 billion - 25 per cent higher than previously stated - after updating the base year for its calculation. Growth for 2013 was revised up to 5.7 per cent from 4.7 per cent.
Armando Morales, the IMF representative in Nairobi, said the new numbers ended the puzzle of why economic reforms in recent years were not being reflected in more robust growth numbers.
“Now we have found confirmation that, using better statistics, these reforms have been translating to growth,” he told Reuters. “Our perception was of a booming economy; an economy ready for take-off.”
Better off
However, Devolution and Planning Cabinet Secretary Anne Waiguru explained these figures do not mean Kenyans are better off than yesterday but that the economy is worth much more than initially thought. Government officials had previously hinted that with the re-basing, the economy might be 20 per cent greater than previously measured. The re-basing lifts average per capita income in Kenya to $1,246 – effectively meaning that the country moves to lower middle-income status.
Previous figures had consistently underestimated the growth rate, in spite of reforms, including a review of taxes to boost revenue, a tightening of banking and capital market regulations to cut risk, improvement in the management of public finances and general economic governance.
Morales, however, said the Kenyan economy still faces challenges, particularly after a spate of militant attacks over the past year that have dented the tourist trade, a major source of hard currency.
The fund is likely to lower its 2014 growth forecast of 5.5 to 6 per cent to closer to 5 per cent, Morales said, after the government revised its forecast to between 5.3 and 5.5 per cent from 5.8 per cent after the re-basing exercise.
But Morales said Kenya could push growth above 6 per cent if it can be more consistent on economic policy, referring to interest rates decisions that resulted in high inflation and currency weakness in recent years.