•Last year, the Kenyan government implemented radical fiscal policy changes on taxation, public spending, government operations and public debt management.
•The EIU index measures the attractiveness of the business environment in 82 countries and territories, examining 91 indicators spread across 11 different categories.
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Kenya has been ranked among the places with a weak business environment but has the potential for improvement over the next five years.
This is according to a report by the Economist Intelligence Unit (EIU), a global business intelligence & market insights company.
Kenya and Angola were the only African countries on the list of prospects.
The report ranked Kenya at position six among the most improving geographies in the business environment between 2019 to 2023, mainly driven by the massive investments in infrastructure under the period.
“Kenya passed a Privatisation Act in 2023, which will help to trim the state’s excessively large economic footprint while boosting the private sector,” reads the report in part.
Last year, the Kenyan government implemented radical fiscal policy changes on taxation, public spending, government operations and public debt management.
The radical changes were meant to narrow the fiscal deficit that was under pressure due to low tax yields, rising debt service obligations and spending pressures.
Following the reforms, World Bank had projected Kenya’s economy will grow at a faster rate of 5.2 percent in 2024, boosted by increased private sector investment as the government reduces its borrowing from the domestic credit market.
The EIU index measures the attractiveness of the business environment in 82 countries and territories, examining 91 indicators spread across 11 different categories.
The categories include the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market, infrastructure and technological readiness.
Kenya’s competitor Angola on the other hand, while close to the bottom of the rankings, the report says is arguably a better place to do business than five years ago.
The latest business environment index revealed that Singapore, Denmark and the US will be the three geographies with the best business environment over the next five years.
Several West European economies, alongside Canada, Hong Kong and New Zealand, make up the remaining top ten best places in the world to do business.
"These are all advanced economies and long-standing strong performers in our index, so tend to be safe bets for investments," the report reads in part.
However, both headline and per capita GDP growth rates are likely to be fairly stable and slow.
To identify which economies may be best placed for an acceleration in per-head GDP and investment growth, there is need to look further down in the ranking, according to the report.
These are not the same economies that will see the fastest real GDP growth in 2024-28—although Qatar and India will grow very strongly—rather, they are places where there is an expected significant policy improvements, infrastructure investment, or growth in market opportunities.
In contrast, Venezuela has been ranked the worst country to do business, and it is projected that it will remain so, despite a slight improvement after its painful economic collapse.