By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-Kenya’s economy climbed up 25 percent after its authorities changed its gross domestic product (GDP) base calculation year to 2009 from 2001, making it to be amongst the top 10 economies in Africa.
According to a Reuters report, the East Africa’s economy was calculated to be 4.76 trillion shillings ($53.4 billion) in 2013 after the rebasing, up from 3.8 trillion shillings ($42.6 billion), the minister for devolution and planning, Anne Waiguru, told a news conference on Tuesday.
‘’That takes Kenya up to ninth in Africa’s GDP rankings from 12th, above Ghana, Tunisia and Ethiopia but below oil-producing Sudan based on a World Bank table for 2013,’’ Waiguru said.
The rebasing exercise means debt levels fall as a proportion of GDP, a closely watched ratio, and could give the government some leeway for more borrowing to help finance its plans to build new transport links and repair creaking infrastructure.
But revising the estimated size of GDP does not change Kenya’s ability to repay additional loans nor does it mean it has more income to spend on development in a nation where many people are poor, roads are potholed and power supply is scarce.
“This gives us a little bit of welcome breathing space … not an opportunity to open the cash register,” said public policy and economic analyst Robert Shaw.
As with other rebasings in Africa, the move takes into account structural and other economic changes, such as new technology, and updates the base year for prices.
This is coming on the heels of the rebasing of Nigeria’s GDP about six months ago; which saw its economy emerge the largest in Africa at $509 billion beating South Africa.
However, the report says Kenya’s rebasing was less pronounced because the gap with 2001 and the new base year of 2009 was shorter.
The Reuters report affirmed that changes in assessing agriculture, manufacturing and real estate accounted for most of the GDP rise. Technology and related fields are now treated as a standalone sector, taking into account a vibrant industry in Kenya, which has pioneered mobile telephone payments systems and exported the idea across Africa and beyond.
‘’With the rebasing, economic growth was revised to 5.7 percent in 2013, up from the previous estimate of 4.7 percent, a figure that had been below expectations and was partly blamed on a spate of militant attacks and a decline in tourism,’’ the report said.
Commenting on the exercise, Diariétou Gaye, World Bank’s country director for Kenya, confirmed the new numbers were credible and they constitute an important improvement in the economic and statistical knowledge base for Kenya.’’A World Bank team joined other experts conducting a peer review of the rebasing exercise.’’ Gaye said.
The report also quoted Razia Khan, London-based Africa economist at Standard Chartered Bank, as saying before Tuesday’s announcement that debt service capacity and export growth, neither of which is expected to be substantially revised, are much more important when it comes to being able to take on more debt.
‘’With a population of about 44 million people, the new GDP figure implies economic output per capita stands at more than $1,200. That would push Kenya onto the bottom rung of middle income states, according to the World Bank’s $1,045 to $12,746 band,’’ Khan said.
