Kenya’s economic freedom score is 55.3, making its economy the 132nd freest in the 2020 Index.
Kenya is the economic, financial, and transport hub of East Africa and the third largest economy on the continent. Since 2014, Kenya has been ranked as a lower middle income country because its per capita GDP crossed a World Bank threshold. While, the Kenya’s real GDP growth has averaged over 5% for over a decade.
The country is the most developed of the original three countries of the East African Community (Kenya, Uganda and United Republic of Tanzania). It was formerly one of Africa’s strongest economies, with average annual growth of five per cent in the late 1980s, based on agriculture (notably tea and coffee production and horticulture) and tourism.
Although Kenya’s economy is projected to grow at 6.1 per cent this year, analysts are already painting a picture of grim prospects. Increased layoffs due to a depressed private sector, profit warnings by listed firms as well as high rates of unemployment, all dampen the county’s economic prospects.
Looking inward, the East African nation has made significant political, structural and economic reforms that have largely driven sustained economic growth, social development and political gains over the past decade. However, its key development challenges still include poverty, inequality, climate change, continued weak private sector investment and the vulnerability of the economy to internal and external shocks.
Global health crisis and virus lockdowns are set to deal a heavy blow to the economy
Kenya plans to spend 53.7 billion shillings ($503 million) on a stimulus package to support businesses that have been hit by the coronavirus pandemic, according to the National Treasury. The economy has further deteriorated in the second quarter as confinement measures to slow the spread of Covid-19 are constraining domestic activity, while lockdowns abroad are depressing tourism revenues and remittance inflows. Meanwhile, the threat of a second wave of locust swarms poses a further downside risk to the outlook.
While, small businesses in Kenya are challenged by the lack of essential business support services, especially financial services. Two-thirds of Kenyans do not have access to basic financial services such as banking accounts.
In April 2020, the private sector PMI hit a two-and-a-half-year low amid social-distancing measures and input shortages. Exacerbating matters, heavy rains are further threatening food security and agricultural production, following the locust invasion earlier in the year. In a bid to cushion the hit to the economy, the government is planning an additional USD 500 million stimulus package, while the World Bank on 20 May approved a USD 1.0 billion loan aimed to help fill the budget gap generated by the coronavirus shock. This comes on the heels of a USD 739 million disbursement from the IMF earlier in May.
In addition to aligning fostering economic development through the country’s development agenda to the long-term development plan; Vision 2030, the President in December outlined the “Big Four” development priority areas for his final term as President. The Big Four will prioritize manufacturing, universal healthcare, affordable housing and food security.