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volume of exports reduced by 9.9 per cent in 2009, with respect to 2008.
27
The adverse effects of these multiple shocks have weakened Kenyan economic performance, and resulted in a decline of real GDP growth
rate to 1.7 per cent in 2008. Also, the current external account deficit widened to 7.5 per cent of GDP, compared to 5.8 per cent of
GDP the previous year. That reflected the increase in maize imports and the relatively high oil import bill. The current account deficit followed the pace and stood at 4.9 per cent of GDP in 2008 from 3.8 per cent in
the previous year, due to the shortfall of capital inflows to finance the budget.
In early 2009, the Government of Kenya implemented significant measures to curb the spillover effects of crises. A fiscal package intended to revamp the economy and the political climate was
implemented, which focused on key sectors such as infrastructure, agriculture, and tourism, and key groups such as youth and population affected by increase in food prices.
Thus, many sectors experienced a contraction in 2008 – including tourism, which suffered a near collapse in the first half of 2008, with a sharp drop of 36.1 per cent in value added. In addition, the
agricultural sector performed poorly, with 5.1 and 2.6 per cent of negative growth, respectively, in 2008 and 2009 compared with the positive growth of 2.1 per cent in 2007. This performance was partly due to adverse
weather and the post-election crisis.
Others sectors for their part have grown slightly due to the decline of global demand. For instance, manufacturing sector output grew by 3.5 and 2 per cent, respectively, in 2008 and 2009 compared with 6.5
per cent in 2007, faced with high costs of production and reduced demand. The construction sector has been the only one which recorded good performance over this period. Its
growth rate reached, respectively, 8.2 per cent and 14.1 per cent of growth in 2008 and 2009, reflecting the implementation of public works and the maintenance and construction of infrastructure.
Figure 2. GDP growth by sector: 2007-2009
Source: Central Bank of Kenya, Annual Report 2009.
The Kenyan economy is forecast to gain another 1 percentage point of growth compared to 2009, and stand at 3.6 per cent – still far from the pre-crisis level. Inflation has dropped reaching 3.5 per cent in June
2010.
28
27
Source: UNCTADSTAT.
12.9 11.3
16.3 15.1
-5.1 -13.2
2.9 3.5
8.2 4.8
-36.1 3.1
-2.6 7.4
-4.2 2
14.1 42.8
6.4
-40 -30
-20 -10
10 20
30 40
50
Agriculture and forestry
Fishing Mining and
quarrying Manufacturing
Construction Wholesale and
retail trade Hotels and
restaurants Transport and
communication
G ro
w th
i n
p e
rc e
n ta
g e
2007 2008
2009
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Labour market analysis before the crisis
According to the Kenyan Poverty Reduction Strategy Paper 2008, 14.6 million people were labour market participants, whereby 11.9 million are employed while 1.7 million are openly unemployed in 2007.
The unemployment rate among the youth aged 15-24 years stood at 24.5 per cent, with that of females being higher at 27.4 per cent compared to 21.6 per cent for males. Urban areas account for higher rates 38.5
per cent compared to the rural areas 18.9 per cent.
The agriculture and tourism sectors accounted for respectively almost 60 per cent, and 7.1 per cent of total employment. The private sector accounted for 65 per cent of formal wage employment in 2007.
The service sector is the main source of formal employment, accounting for about 55 per cent of the wage employment. Wholesale and retail trade, hotels and restaurants accounted for 58.6 per cent of informal
employment in 2006, followed by the manufacturing sector at 22 per cent in the same year. As shown in table 1, the rate of male wage employment in all sectors is higher than that of women.
Women are predominantly engaged in domestic unpaid work, subsistence agriculture and informal sector activities.
Table 1. Wage employment by selected industry and gender, 2006 and 2007
+ , -
.
1 Source: KNBS 2009
Post-electoral violence and the global financial crisis threatened workers …
The tourism sector has been strongly hit by the crises. For instance, five hotels have closed in Malindi city, laying off 4,000 workers following massive cancellations by European tourists. Turning to exports, they
were faced with a contraction in 2009. By the end of the first half of 2009, at least one-third of the 1.5 million employees in the horticultural industry had faced lay-offs, according to the Kenya Flower Council, resulting
from the drop in demand for flowers by up to 30 per cent. Companies in the energy sector also announced that they were forced to lay off workers, including casual workers.
Faced with the challenges of restoring political stability and economic performance, the government eased monetary policy and took new measures to develop and maintain infrastructure, support agriculture,
create employment for youth, and support living standards through food subsidies.
28
The Kenyan National Bureau of Statistics released the new inflation series in October 2009 which resulted in a significant drop in reported inflation. The level of recorded inflation had been seriously distorted by the previous computational
methodology. For instance, September 2009 inflation under the old methodology was 17.9 per cent, whereas under the new methodology it was 6.71 per cent Central Bank monetary statements, December 2009.
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2. Measures taken to face the crisis
