Kenya running in losses on high trade deficit

In Summary

• The expenditure on GDP stagnated at 113 .1 per cent above the value

• Kenya incurred a business loss of 13.1 per cent

Treasury Building
Treasury Building

Edward* a carpenter in Kayole is spending Sh10,000 on timber, Sh2,000 for transport and Sh2500 to pay his assistant. He however manages to make chairs valued at only Sh8,000 every month, incurring losses.

This analogy best describes Kenya’s economic value estimated at Sh8.9 trillion in 2018 compared to a gross domestic expenditure of Sh10.07 trillion, surpassing the Sh10 trillion for the first time in the country’s history.

According to the Economic Survey 2019 unveiled on Thursday by the Kenya National Bureau of Statistics (KNBS), the proportion of private consumption and that of government increased slightly, pushing the gross domestic expenditure up by 9.3 per cent compared to Sh9.2 trillion in 2017.

Consequently, the expenditure on GDP stagnated at 113 .1 per cent above the value, meaning that the country incurred a business loss of 13.1 per cent.

The survey attributes this to Kenya’s growing trade deficit and diminishing value of locally produced good.

Even so, the country recorded the highest change in inventories at 98.9 billion in 2018 compared to Sh61.3 billion in 2017. Kenya’s inventories have been growing from a negative position in 2014, easing burden on cost of production.  

The data shows that the private sector, biggest contributor to the economy spent Sh7.2 trillion on production during the year under review up from Sh6.5 trillion in 2017, representing a whopping 81 per cent of expenditure on GDP.

The government on other hand spent Sh1.14 trillion up from 1.03 trillion in 2017 while Non-Profit Institutions Serving Households (NPISH) spent 0.8 per cent.

Expenditure on gross fixed capital formation dropped to a 5- year low of 17.3 per cent compared to 18 per cent reported the previous year.

This means, less resources were spent creating and maintaining key assets including buildings, intellectual property products, machinery, crop and animal resources.

Buildings continue to form the largest part of the country’s fixed assets. The total value of fixed assets grew to Sh1.53 trillion last year compared to Sh1.46 trillion in 2017.

Despite this, KNBS data shows that Kenya’s GDP grew 6.3 per cent last year and is projected to slow to 6.1 per cent this year. Consequently, the country’s  GDP per capita grew with each Kenyan valued at Sh100,310 from Sh96,787 in 2017.

Although Kenya’s GDP at market price has been growing year on year, experts are against the use of it to measure real economic health. Some applies to GDP growth which they argue does not portray real picture people’s living condition.

‘’It measures income, but not equality, it measures growth, but not destruction, and it ignores values like social cohesion and the environment. Yet, governments, businesses and probably most people swear by it,’’ economist Ndirangu Ngunjiri wrote in an opinion piece.