Modern services will continue to stimulate growth for Kenya’s economy through this bout of volatility as it suffers shocks from declining commodity prices and political risk said the World Bank.
The service industry contributes up to 50 per cent of its gross domestic product (GDP) followed by manufacturing and agriculture and may be what the country needs to sustain growth if the new report by the World Bank proves to be right.
“I would be less concerned about reaching equitable growth across these three and more about what makes growth more inclusive,” said Apurva Sanghi, the Lead Economist & Program Leader at the World Bank.
He adds: “Just because agriculture and manufacturing have been giants of the past, doesn't mean they have to be giants of the future and in fact, one finding is that services have emerged as the star performer.”
Sanghi explains the significant disconnect between growth and poverty reduction in Kenya, saying the issue is that most of the poor are still focused in agriculture while growth has been happening in services.
“The fact that for example, agriculture is still pretty volatile and it is pretty driven by what happens to the climate that increases volatility and agriculture is still a quarter of the economy,” says Sanghi.
The report also touches on external shocks, such as food, oil and trading partners affecting the economy through inflation while domestic shocks are in macro-economic and political instability, which would have longer lasting effects.
Sanghi explained that its report findings showed it would be crucial for the country to maintain political stability and peaceful elections, because that would encourage foreign investment.
Services are over half the economy, with over 50 per cent of the GDP coming from services and services will continue to grow, regardless of what happens to manufacturing and agriculture said Sanghi.
“The modern services are really pushing up the economy, driving growth - whereas agriculture and manufacturing have remained stagnant.
“Agriculture is still key in reducing poverty but in terms of driving growth, the action is really in services.”