The declining level of Kenya’s exports relative to rising imports could derail the country’s positive economic growth outlook of 6 per cent this year, analysts have warned.

Last year, Kenya’s current account deficit – measured in terms of what the country earns from exports in relation to payment for imports – widened by 17 per cent to Sh510 billion, extending a relentless multi-year trend that could jeopardise the country’s ambitious growth projections. 

In 2006, the current account deficit stood at Sh47 billion but has continued rise following fast-growing imports. 

Exports have, on the other hand, shrunk over the years, a trend that poses a big risk to the country’s macro-economic stability.

“There still exist potential risks that could taint this rosy picture such as widening of the current account deficit, public expenditure pressures, especially on wages, and unexpected weather patterns (reduced rainfall) in parts of the country could (undermine) output in the agricultural sector,” analysts at Sterling Capital said in their Fixed Income Outlook Report for March 2015. 

BOOST PRODUCTION

While releasing the Kenya Economic Update on March 5, 2015, the World Bank sounded an alarm on sluggish demand for Kenya’s exports, stating that the country needed to boost productivity and improve the business environment to regain and increase its competitiveness. 

“In recent years the manufacturing’s contribution to Kenyan exports and growth has fallen behind and performance has been less than optimal. 

“Kenya needs to increase the competitiveness of its manufacturing sector so that the country can grow, export and create much-needed jobs,” World Bank Group private sector development specialist Maria Mogollon said when the KEU report was released. 

Kenya’s economy is estimated to have expanded by 5.9 per cent last year, above the sub-Saharan Africa average projected at 5 per cent.

This year, it is anticipated to grow by 6.2 per cent, riding on lower inflation levels and a stable macro-economic environment.