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Country Report Kenya at a Glance: 2006-07

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Country Report Kenya at a Glance: 2006-07 Country Report Kenya Kenya at a glance: 2006-07 OVERVIEW The president, Mwai Kibaki, will continue to push ahead with key social and economic reforms, but deep divisions within the ruling National Rainbow Coalition (NARC) will generate tension and uncertainty. Even if Mr Kibaki wins the referendum on the new constitution, he will need to take firm action against corruption to win the trust of the electorate and donors again in 2007. Economic policy will be guided by the country’s poverty reduction and growth facility (PRGF) with the IMF and the donor community. Real GDP growth of an estimated 5.2% in 2005 is forecast at the similar level of 5.3% in 2006, rising to 5.5% in 2007 as donor-backed investment projects make it cheaper and easier to conduct business. Key changes from last month Political outlook • Mr Kibaki and his allies are urging Kenyans to vote “yes” to the proposed new constitution in the referendum that is due to take place on November 21st, using the banana as the symbol for a “yes” vote. However, the opposition Kenya African National Union and rebel NARC ministers have united under the “orange” banner to call for a “no” vote on the grounds that the new draft does nothing to curb the president’s extensive powers. An opinion poll in October gave the “no” camp a slight advantage, but there are still a large number of undecided voters. The prospect of a close result has added intensity to campaigning, leading to violent three-way clashes involving rival supporters and the police. A “no” vote would weaken the president and increase pressure for early elections, but a “yes” vote would cement his authority and give him a good chance of winning the next general election, scheduled for 2007. Economic policy outlook • Kenya has complied with most loan conditions during the second year of the PRGF, according an IMF mission that visited the country in October 2005. The mission will recommend that the IMF executive board authorise the release of the third and fourth tranches of the loan, worth US$72m, when it meets in December 2005. The funds are likely to be disbursed in January 2006. Economic forecast • Economic prospects remain essentially unchanged. November 2005 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2005 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN 0269-4239 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. Kenya 1 Contents Kenya 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2006-07 7 Political outlook 9 Economic policy outlook 11 Economic forecast 14 The political scene 18 Economic policy 23 The domestic economy 23 Economic trends 25 Agriculture and horticulture 26 Energy 28 Transport and communications 29 To u r i s m 29 Financial services 30 Foreign trade and payments List of tables 11 International assumptions summary 13 Forecast summary 20 Corruption Perceptions Index 2005: selected countries in Sub-Saharan Africa 23 East African Community: selected business indicators 26 Cash crop production 29 Tourist arrivals by air and sea (January-August) 31 Current account (year to July) 32 Foreign direct investment into Sub-Saharan Africa List of figures 13 Gross domestic product 13 Consumer price inflation Country Report November 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 Kenya 3 Kenya November 2005 Summary Outlook for 2006-07 The president, Mwai Kibaki, will continue to push ahead with key social and economic reforms, but deep political divisions over the proposed new consti- tution and the future of the ruling NARC will generate tension and uncertainty. Corruption will remain a key battleground, particularly in respect of maintain- ing the support of donors and the public. Real GDP growth is forecast at 5.3% in 2006 and 5.5% in 2007 as rising donor-backed investment projects make it cheaper and easier to conduct business. The current-account deficit is expected to widen to 6.5% of GDP in 2005, before narrowing to 5.5% of GDP in 2006 and 4.1% of GDP in 2007 as visible and invisible export earnings grow strongly. The political scene Kenya’s politicians and the public are deeply divided over the proposed new constitution and have split into two opposing camps in the run-up to the country’s first ever referendum, scheduled for November 21st. The “banana” team, backed by Mr Kibaki, is urging a “yes” vote for the new draft, while the “orange” team, an alliance between NARC rebels and the opposition KANU, is calling for a “no” vote. An opinion poll suggests that the result will be close, adding intensity to the campaigns and fuelling widespread violence. Economic policy An IMF mission in October endorsed Kenya’s performance under the second year of the poverty reduction and growth facility, and will recommend to the board that it release the next two tranches of the loan, worth a total of US$72m, when it meets in December. The mission warned, however, that more needs to be done to tackle corruption. According to the latest annual rankings from TI, Kenya’s score was unchanged in 2005, illustrating how the fight against graft has stalled. Parliament finally passed the long-awaited privatisation bill in August, although it does not give a firm timetable or the list of assets for sale. The domestic economy Real GDP growth has remained robust, supported by strong performance across a number of sectors, particularly tourism. Agriculture has also recovered after last year’s drought, and a bumper maize harvest is forecast. Inflation has been heading steadily downwards owing to a fall in food prices. Foreign trade and payments Kenya’s current-account deficit surged to 5.9% of GDP in the year to June 2005, as imports grew much faster than exports, but capital inflows helped to keep the overall balance of payments in surplus. FDI inflows to Kenya remained low, however, at only US$46m in 2004—much lower than its East African partners— according to recent data from UNCTAD. Editors: Pratibha Thaker (editor); David Cowan (consulting editor) Editorial closing date: November 11th 2005 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report November 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 4 Kenya Political structure Official name Republic of Kenya Form of state Unitary republic Legal system Based on English common law and the 1963 constitution; the draft of a new constitution was published in September 2002 National legislature Unicameral National Assembly of 210 elected members plus 12 nominated members, the attorney-general and the speaker; a multiparty system was introduced in December 1991 National elections Next presidential and legislative elections are to be held in December 2007 Head of state President, directly elected by simple majority and at least 25% of the vote in five of Kenya’s eight provinces National government The president and his cabinet, composed entirely of members of the National Rainbow Coalition (NARC) Political parties in parliament National Rainbow Coalition (NARC, 132 seats); Kenya African National Union (KANU, 68 seats); Forum for the Restoration of Democracy-People (Ford-People, 15 seats); Safina (2 seats); Ford-Asili (2 seats); Sisi Kwa Sisi (2 seats); Shirikisho (1 seat) President & commander-in-chief Emilio Mwai Kibaki Vice-president Moody Awori
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