Economics Analysis

Economic Analysis

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Economic Analysis

Introduction:

In recent times, Kenya has made great leap in economic and structural reforms which has spurred economic growth. The challenges they face is income inequality, poverty, and vulnerability to the external and internal shocks. According to the World Bank (n.d.), Kenya`s economic growth has been estimated to rise to 5.9% in 2016 and projected to reach 6.1% in 2017. This positive growth is mainly attributed to infrastructure investments. Increased credit uptake in the private sector and pressure on domestic interest rates are expected to go down due to fiscal consolidation.

Kenya`s strengths includes its strategic geographic location, natural resources, and human resources. Its major exports are cut flowers, tea, vegetables, and coffee. Kenya`s agricultural sector contributes 23.4% of the GDP. Manufacturing is the second largest sector and represents around 11 percent of the GDP. Other major sectors include: real estate (about 8 percent of total GDP), wholesales and retail Trade (around 7 percent), transport and storage (around 7 percent), education (about 7 percent), financial and insurance activity (around 6 percent) and construction (around 5 percent). Remaining part of GDP is mostly allocated to electricity supply; information and communication; administrative; public administration and defense; and support service activities; human health and social work activities (World Bank, 2013).

Challenges in Kenya`s economy includes the high cost of skilled and educated laborers. Its cost is usually higher compared to its neighbors. Corruption and insecurity are other challenges that affect the smooth running of business in Kenya. According to Transparency International, Kenya had a poor ranking of 154 out of 183 countries (World Bank, n.d.). This is due to the many problems that occur in land acquisitions or in large government contracts. Kenya`s public contracting law cannot be considered effective and reliable since government officials can easily award companies that offer them bribes. Therefore, it is difficult to assess whether business partners are chosen on the basis of official credit ratings and audited financial statements. Moreover, the rampant violation of intellectual property rights in music, medicine and software exist in Kenya. Enforcement of law is usually slow and very expensive (World Bank, 2013). Also, there is usually plenty of cynicism regarding the objectivity of judicial and executive branch decisions.

Production Output Performance Analysis

Real Gross domestic product (GDP) refers to a macroeconomic measure of economic output value which is adjusted toward price changes. This adjustment tends to change the nominal GDP into a quantity of total output index. Since real GDP is not affected much by rapid growth, and given that inflation rates vary in different countries, it is a suitable tool to use when comparing GDP growth rates of various countries (Benson, 2012).

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