Kenya Economic Outlook

The economy experienced moderate growth in 2011 which is expected to rise slightly in 2012 and 2013.
The year 2011 witnessed drastic currency depreciation and rapid inflation, both of which are expected to stabilise in the next two years.
Youth unemployment constitutes 70% of total unemployment.

In 2011 Kenya’s economy recorded moderate growth, driven primarily by financial intermediation, tourism, construction and agriculture. Gross Domestic Product (GDP) growth is projected to expand modestly in 2012 and 2013. In 2011 it was held back by an unstable macroeconomic environment characterised by rising inflation, exchange rate depreciation and high energy costs. Limited rainfall in the first half of 2011 resulted in a decline in aggregate food production, a factor that contributed significantly to runaway inflation. The inflationary pressures experienced in 2011 and the depreciation of the Kenyan shilling (KES) can be traced back in part to the Central Bank of Kenya’s decision to cut its repo rate from 7% to 6% in December 2010 in a bid to revive lending and stimulate growth. However, increased consumer demand pushed up prices and put pressure on the Kenyan shilling as demand for imports increased substantially. Inflation is projected to fall to single figures in 2012 and 2013 thanks to improved food production and stability in fuel prices. The year 2011 was marked by the passing of legislation to put into effect the new constitution and the appearance of six Kenyan citizens at the International Criminal Court, while political parties began preparing for elections expected in 2012.

Youth unemployment is a growing problem in Kenya as it makes up 70% of total unemployment. The Youth Enterprise Development Fund, operational over the last five years as the main intervention agency, has, among other actions, disbursed almost KES 6 billion to some 157 538 youth enterprises; organized youth trade fairs; built simple infrastructure for young people; and started pre-financing training for the young. The fund will be expanded in the coming years to ensure increased employment for the young.