Just how large is Kenya’s GDP in 2021?
|Geothermal is now the lead |
electricity Source in Kenya
Here’s why: There is an animal Economists- and I believe Statisticians too- call rebasing the accounting base year which captures the true size of the economy. Rebasing is updating the base year to a new year so that the accounting of GDP is updated. Rebasing, therefore, means selecting a new base year.
You see, the economy is not static. It is dynamic. It therefore grows and expands over a period of time. The expansion includes new economic activities that were initially insignificant, but have become significant contributors. It also includes new developments that did not exist previously. It also includes new Technological advances that improve efficiency in the production of goods and services. All these expand the basket of goods available in a country.
For these reasons, countries rebase their accounting base year to account for all these changes. A base year is a date when things were relatively stable. The World Bank recommends rebasing this date every five years but many countries take longer.
In Kenya, the new accounting period was announced in 2014, updating the base year to 2009 from 2001. Consequently, the GDP expanded to US$55 billion, that is, $11 billion larger than the size captured using the old base year.
Kenya entered the low middle- income class with a per capita GDP of around $1,240 due to the update, Kenya also became the Ninth largest economy in Sub-Saharan Africa. Last year, Bloomberg, the US-based economic and financial data outlet reported that Kenya was the third-largest economy in the region, after Nigeria and South Africa, having leapfrogged six other countries.
|SGR: This did not exist in 2010|
This leads to the thematic question: Just how Large is Kenya’s GDP? The last base year, 2009, is now outdated as it is more than 10 years old. We need to rebase the economy to a more recent year. We think 2018 is a stable year.Kenya’s GDP based on the 2009 base year is currently estimated at $101 billion, almost double the 2014 figure. Given the massive developments in the country’s financial and infrastructure sectors over the past 10 years, the nominal GDP must be larger than $101 billion perhaps $120 -$125 billion as at end of 2020. That means that Kenya’s GDP per capita is larger than $2,045, perhaps heading towards $3,000 in nominal terms.
Here are some facts: In 2010, a year after the update, electricity generation was 1,471 MW dominated by hydro and thermal sources. Geothermal was still lower than 300MW. There were 15MW of wind power and solar was restricted to households. Since then green energy sources have grown in importance and contribute a large chunk of power to the national grid. Geothermal at 1,125 MW has leapfrogged Hydro to be the baseload source. A baseload source is the source of electricity generation that must be at the system at all times. Wind Power has jumped to 336 MW, Solar has entered the scene generating 50MW to the National Grid.
Kenya is now the world’s fifth-largest generator of geothermal energy and an exporter of geothermal technology. The national power generating capacity has almost doubled to 2,651 MW while peak demand hovers around 1,900 MW. For the first time in its history, Kenya can claim to be electric power secure.
In the transport sector, paved roads increased from 11,183 KM in 2010 to 17,600KM in 2019 and still counting. We have 600KM of high speed Standard Gauge Railway operational. This did not even exist in 2014. The Mombasa Port has seen its container handling capacity rise from 440,000 TEUs to 1.5 Million TEUs. Its freight handling capacity has risen to 34 million tons a year in 2019 from 14 million tons in 2014.In the financial sector, mergers have created behemoths with a total capital base of US$20 billion. KCB Groups' capital base is larger than the largest banks in Tanzania and Uganda combined. All these developments and others we have not enumerated have expanded the wealth of the country significantly.
Rebasing the accounting year could produce astounding results. No. we shall not beat the top two. We shall be a larger number three. The last time this publication attempted this back in 2014, we missed the figure by a significant US$2 billion. We hope we are again $2 billion dollars short but we could miss it by a larger figure. The results would nonetheless be astounding.
If rebased, GDP per capita will definitely rise past $2500. The debt to GDP ratio will significantly shrink perhaps to 50 percent of GDP, or slightly up or down. Kenya would improve its debt risk ratings from a distress risk to something better.
From the anti-debt warriors’ standpoint, debt per capita will shrink further compared to income per capita. This could be a cause to worry for the ADWs for it could pull the carpet from under their feet.
Even then, It is time for the government to act and rebase our economy!