•The government is also banking on the transformation of the Micro, Small and Medium Term (MSME) to drive economic growth.
•Treasury’s growth projection is higher than the World Bank’s forecast which puts 2024 GDP expansion at between 4.5–5.2 per cent.
Image: FILE
The economy will grow by 6.3 per cent this year, National Treasury now says, even as the country navigates through high inflation and interest rates.
Overall GDP growth is projected to increase from 6.1 per cent last year, having picked from 4.4 per cent in 2022 when the country took a hit from the impact of the Covid-19 pandemic.
According to Treasury, this year’s growth will be driven by raising agricultural productivity as the government implements key components of the Bottom Up Economic Transformation Agenda (BETA), which is President William Ruto’s plan to drive growth, create wealth and jobs.
Priority areas in the agriculture sector includes value chains in crops and livestock.
Targeted sub-sectors include leather, textile and apparel, dairy, edible oils, tea and rice.
The crop value chain will be supported by provision of subsidised farm inputs (fertiliser, seeds and seedlings), construction of agro-processing plants, establishment of county aggregation and industrial parks, food processing hubs among others.
The government is also banking on the transformation of the Micro, Small and Medium Term (MSME) to drive economic growth, where it is channeling about Sh50 billion through the Hustler Fund programme annually.
Increasing investment in housing and settlement through construction of 200,000 units annually is also expected to support growth, according to Treasury.
Other sectors include healthcare by delivering of the Universal Health Coverage system and digital evolution, by investing in the digital superhighway and the creative economy. Treasury notes in the fourth Medium Term Plan (2023-2027).
Under the plan, the government is keen on bringing down the cost of living with a target of five per cent for the country’s inflation, which was recorded at 6.3 per cent in February.
This was down from 6.9 per cent in January as prices of food items, electricity and fuel declined.
President Ruto’s government also has an ambitious plan to eradicate hunger (zero hunger), create at least 1.2 million new jobs annually during the five years period and expand the tax base to increase revenue collection to 19.7 per cent of the GDP by 2027-2028.
It also plans to improve the foreign exchange balance through promotion of exports to improve reserves to 6.1 months of import cover, currently averaging $6.97 billion (924.1 billion) which is about 3.7 months of import cover.
“These objectives will be achieved through targeted investments in BETA core pillars and enablers,” Treasur, led by CS Njuguna Ndungu, said in the plan.
Treasury’s growth projection is higher than the World Bank’s forecast which puts 2024 GDP expansion at between 4.5–5.2 per cent.
Improved investor confidence and credit to the private sector, helped by reduced domestic borrowing by the government, will strengthen private investment over the medium term, World Bank notes in its update.
The outlook is however subject to elevated uncertainty because of domestic and external risks.
According to the Kenya Economic Update report, debt related vulnerabilities persist, and rising debt costs constrain government’s ability to address development challenges.
The country is however making progress and has reduced the primary deficit from 1.6 per cent of GDP in financial year 2021-22 to 0.8 per cent of GDP in 2022-23, while the overall deficit decreased from 6.2 per cent to 5.6 per cent during the same period and is expected to reduce further to 5.4 per cent in 2023/24.
“Kenya will need to balance the short-term challenges of macroeconomic stability with the need to focus on policies for achieving longer-term growth that includes all in society,” said Naomi Mathenge, World Bank Senior Economist, and author of KEU.
World Bank notes that the recovery of agriculture has led to improvements in food supply and coupled with monetary policy tightening, it has helped reduce inflationary pressures.
In 2023, tourism continued to expand, credit to the private sector improved and manufacturing activity is expected to improve from the anticipated growth in agro-processing sector.
The country's private sector however remains concerns over high taxation and operating costs, which could see firms either scale down operations or shut down, meaning job lossses.