Destination Point Kenya

International Trade

Volume of trade in terms of exports and imports recorded marginal declines resulting to narrowing of the trade deficit. Current account improved to record a surplus for the first time since 2003. Significant falls in export prices and volume various export items mainly explains the sluggish performance of the export sector .

The balance of payments deteriorated slightly to a surplus of K£ 212 million in 2008 from K£ 228.7 recorded in 2007. The current account balance recorded a surplus of K£ 38.9 million mainly as a result of better performance of the services sectors particularly tourism earnings .

Late in 2008, the East African Co-operation Treaty was signed and aimed at creating a common market in the region. The end objective of this treaty is to create a market of about 90 million people, tap economies of scale, reduce duplication of resource allocation, lessen bureaucracy and streamline business relations within the region. This will boost Kenya’s exports in the region as it has a relatively stronger industrial base.

Manufacturing  
  
The manufacturing sector remained depressed due to lack of effective demand for locally manufactured products, high input costs that were passed on to consumers through high product prices, power rationing and poor infrastructure. The sector was further affected by the ban on fish exports to European Union and reduction of quota allocation for Kenyan garments to the United States of America.

Main growth areas in the sector were the agro-based industries 2.4 per cent, plastic industry 14.6 per cent and paper and paper products 7.1 per cent. Most of the other sub-sectors recorded negative growths. Consequently, the sector registered a slowed growth of 1.0 per cent in 2008, much slower than the 1.4 per cent recorded in 2007.

Building and Construction  
  
Investment in construction and related activities remained subdued in 2008. The contributing factors included the reduction in Government activities as part of the austerity measures to reduce expenditures. Relatively high interest rates constrained the performance of the sector. The value of building plans approved dropped by 13 per cent reflecting slowdown in this economic activities.

Cement production, which is a major indicator of the construction industry , dropped by 107 thousand tonnes indicating a slow. down in the industry .The consumption of the commodity dropped by 5.4 per cent in 2008. However the sector benefitted from rehabilitation of roads under the El Nino Project and the Kenya Urban Transport Programme (KUTIP). This scenario led to a slowed growth of 0.8 per cent in 2008.

The terms of trade deteriorated by about 14.0 per cent from 10.0 in 2007 to 86 in 2008. This was on accoun of escalating oil prices and a sharp fall in the price of coffee, a key export commodity fo the country .When GDP is adjusted for effects of terms of trade, the per capita income declines by about 6 per cent.

Resources available to the economy in 2008 recorded a much slower growth of 5.2 per cent compared to 11.3 per cent in 2007. The growth was however the slowest since 2004. Government direct taxes expanded by K£ 411 million in 2008 compared to K£ 557 million in 2007. Subsidies which are in essence negative taxes, more than doubled. The overall result was a growth in GDP at market price of 8.5 per cent compared to 11.8 per cent in 2007.

A positive development was the reduction of import surplus, as a result of increased exports compared to the imports. Consumption on the other hand dampened to a 6.5 percent growth. Aggregate domestic savings substantially grew by 30.9 per cent. Public consumption on the other hand recorded a growth of 11.8 per cent about the same level to that of 2007. The growth in public consumption was asa result of increased expenditure in education and defence that recorded growths of 10.4 per cent and 12.1 per cent respectively.