By Shiv Arora, Oct 17, 2014
Rebasing of Kenya?s GDP meant replacing the old Base Year used for compiling the total volume of goods and services produced in the Kenyan Economy to a more recent and relevant Base Year. This was changed from 2001 to 2009.
Kenya continuous to be one of the most dynamic economies in Africa. Over the last 10 years the economy have seen new products, infrastructure development, and emergence of exciting sectors away from agriculture. The changes in the economy has resulted in the need to have the economy rebased to allow for more accurate estimates of Economic Growth over the medium term.
Using the new updated base year, 2009, chosen due to the fact that it was a year when many of the country?s reference surveys were undertaken now estimates Kenya?s GDP at 4.76 trillion Shillings in 2013, up from 3.8 trillion Shillings. The rebasing now gives an accurate reflection of the structure and size of the Kenyan Economy, which has risen to sit amongst the Top 10 African Countries, and is now classified, as a middle-income nation.
The rebasing helps improve the understanding of the economy and helps present a much more accurate reflection of the current economic activities that makes up the Gross Domestic Product (GDP). The true reflection of the economy helps investors while making their asset allocation decisions as they can easily tell where there are better returns expected in the future. The new GDP estimates will result to an improved international perception and rating for Kenya and this helps improve the ability of the government and Kenyan corporations to attract money for growth.
Real Estate is gaining more significance in the economy, now contributing more than 8.2% of GDP. It also had the greatest jump with a revised Gross Value Added, by 300 units of measurement, or a 4 times increase in importance. (GVA measures the contribution to the economy of each individual producer, industry or sector). With the better perception of the Kenyan Economy given it?s size and new status, we are likely to see much improved investor confidence and higher flows of foreign direct investment specific to this key sector, ensuring attractive, stable and long-term returns can be extracted from those with the right skills and capabilities.
Shiv Arora is an Investment Associate with Cytonn Investments
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