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Kenya Recent economic trends in Kenya have been
disappointing. The Economic Report on Africa 2002 shows that GDP growth
has been declining since the mid-1990s and has fallen substantially below
the population growth rate, estimated at 2.4%. In 2000, real economic
growth turned negative, dropping from 1.4% in 1999 and 1.8% in 1998 to
negative 0.3%, its lowest level since independence. These rates are far
below government targets of 2.7% for fiscal year 2001, 3.5% for 2002,
and 5.0% for 2003. Kenya's macroeconomic management has been relatively strong in recent years, with inflation rates and fiscal deficits within their targets (except in 2000). The challenge has been, and still is, translating these achievements into growth. The main problem is weak governance, as indicated by extensive corruption, weak rule of law, escalating insecurity, and poor infrastructure. Governance problemswhich haves undermined private sector activities, as reflected in falling investment. Gross fixed capital formation fell from 21% of GDP in 1995 to 15% in 1999. Agriculture, which traditionally accounts for the largest share of GDP, shrank by 2.4% in 2000, while real manufacturing output fell by 1.5%. The balance of payments worsened, with current account and trade deficits increasing. Deteriorating economic and social conditions are also reflected in other key measures. Poverty has increased, and income inequality and social indicators show worrisome trends. In 1997, just over half of Kenyans lived below the poverty line. In 2001, the number of poor Kenyans increased to an estimated 15 million. More than three-quarters of rural and urban poor people could not afford private health care and depended on public health facilities. Yet, nearly three-fifths of the poor did not seek public health care because drugs were not available. Education indicators are also weak for poor people: 13% of the urban poor and 29% of the rural poor have never attended school and the high cost of education is cited as the main reason. Thus, the country's most crucial challenge is reviving economic growth and reducing poverty. Making matters worse, HIV/AIDS has reversed
gains in life expectancy. The disease is the main reason for the drop
in life expectancy from 55 years in 1996 to 49 years in 2000. In 2000,
the national HIV prevalence rate reached 13.5%. The Government responded
by establishing the National AIDS Control Council to strengthen capacity
and coordination. AIDS committees have also been established in all political
constituencies, including provinces and districts. The efforts to control
HIV/AIDS need to continue and expand so as to stop and reverse the negative
impact of the pandemic. However, Tthe Report shows encouraging signs that Kenya's economy should continue to recover in 2002. Growth will be stronger in agriculture, while manufacturing is expected to grow twice as fast as in 2001, partly as a result of improved power supplies, elimination of some tariffs, and reductions in others. Reflecting these positive developments, real GDP is projected to grow by 2.5%. With the domestic economy recovering, exports and imports should expand, causing the current account deficit to increase slightly from 2.6% of GDP in 2001 to 2.8% in 2002. Inflation will also edge upward, reaching 3.8%. Poor governance is the main impediment to
Kenya's development. Poorly managed public resources, widespread corruption,
and the public sector's inability to deliver services efficiently have
undermined development over the years. To reverse this trend, the Government
needs to restructure the public sector effectively, reforming the management
of public spending, strengthening public sector accountabi |