Running on one Engine

Transcription

1 Running on one Engine Kenya s uneven economic performance with a special focus on the port of Mombasa World Bank Economic Team Presentation by Dr. Wolfgang Fengler Press Briefing Norfolk Hotel Nairobi, June 3, 2010

2 Main messages Kenya is recovering - slowly but surely. For 2010, the World Bank is revising its growth forecast upwards to 4.0 percent. For 2011, we project 4.9 percent, if no shocks occur. However, Kenya is running on one engine. Over the last decade growth has been imbalanced, predominantly driven by domestic consumption fuelled by imports. Exports have been weak and non-tradable sectors, such services and construction have performed strongly. The Infrastructure deficit constrains exports and the port of Mombasa is still under-performing. Despite some improvements, port reforms have not kept up with the momentum in other African countries. It still takes 20 days to bring a container from Mombasa to Nairobi. This is longer than to ship the same container from Singapore to Mombasa.

3 Recent Economic Developments and Outlook for 2010

4 Kenya s economy is recovering slowly but surely 8 Economic Outlook Percent GDP Kenya GDP SSA Percapita Kenya Percapita SSA

5 but lags behind growth in East Africa 8 Economic Growth GDP growth % Ethopia Uganda Tanzania Rwanda Ghana Kenya SSA average South Africa

6 Services have been the drivers of growth in 2009, agriculture contracted again 10.0 Sectoral Growth Rate Percent (2.0) (4.0) (6.0) agriculture (25.5) industry (18.8) services (55.7)

7 and Kenya s ICT revolution continues: 20 mn phone connections; 4 mn internet connections 4,200 Telephone and Internet Connections 21 Internet users ('000) 4,000 3,800 3,600 3,400 3,200 3, Telephone connections (millions) 2, Q2 Q3 Q4 Q1 Q2 Q3 Q Internet users ('000) Telephone connections (millions)

8 Macroeconomic management has been strong: Inflation and interest rates declined sharply since Inflation day T.bills rate Jan March May July Sept. Nov. Jan March May July Sept. Nov. Jan March May Jan March May July Sept. Nov. Jan March May July Sept. Nov. Jan March

9 Fiscal deficits have been low For FY 2009/2010, the deficit only reached 4.9% by April Fiscal balance as % of GDP % of GDP Primary balance Overall balance -6-7 FY 06/07 FY 07/08 FY 08/09 FY 09/10 budget April-2010 estimates

10 and the fiscal stimulus will not be fully implemented: 57% disbursement after nine months Education Public health Agric. irrigation,youth affairs, regional dvpt Public works other Disbursed Allocated Fisheries Industrialization Kshs million

11 Kenya Running on one Engine

12 Kenya s share in world trade has been declining sharply since 1970 percent 0.30 Kenya's share in World Exports of Goods and Services services 0.05 total goods

13 The pattern of consumption-led growth and weak exports has been building up for a decade Average contribution to growth (percent) Net exports Domestic Absorption Consumption Investment

14 Consumption has led Kenya out of the crisis in net exports remain negative Contribution to GDP growth Consumption Investment Net exports Percent

15 The current account deficit remains large and is financed by a strong capital account 8.0% Balance of payments % of GDP 6.0% 4.0% 2.0% % of GDP 0.0% -2.0% -4.0% -6.0% -8.0% Curent account capital account overall balance

16 ...which is driven by short term flows 8.0% Capital account composition as % of GDP 7.0% 6.0% 5.0% % of GDP 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% capital account-project grants Official, medium- & long-term Private, medium- & long-term Commercial Banks (net) Short Term and Net Errors & Omissions (NEO)

17 Over the last decade, non-tradable sectors have performed best Transport and communication Average growth (%) Ave. 7.0 Share of GDP, 2009(%) 14.4 Electricity and water Construction Wholesale and retail trade, repairs Hotels and restaurants Mining and quarrying Manufacturing Finance and real estate Agriculture and fishing Other services Percent

18 Manufacturing has been overtaken by transport & communication and wholesale & retail trade Manufacturing overtaken by Transport &Communication Sector Share in GDP (percent) Manufacturing overtaken by wholesale & retail trade Transport and communication 13 % of GDP 12 Manufacturing Wholesale and retail trade, repairs

19 The Port of Mombasa

20 Singapore ships 50 times more goods than Mombasa 30 Port Throughput, Twenty Foot equivalent units (TEUs) 25 TEUs Millions Singapore Hong Kong Rotterdam Durban Lagos Mombasa Dar es Salaam

21 94 percent of Mombasa goods go to Kenya and Uganda

22 At the port, dwell time has been reduced, however,... volume of goods ('000'DWT) 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6, ,000 2, th Qtr nd Qtr '08 4th Qtr '08 2nd Qtr '09 CFS DW TIME 0

23 .. it still takes 20 days to bring a container from Mombasa to Nairobi 3.7 days 18.3 days

24 and Kenya is lagging behind in the implementation of reforms 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Nigeria South Africa Madagascar Mozambique Tanzania Egypt Sierra Leone Morocco Gabon Algeria Ghana Cote d'ivoire Guinea Togo Eq. Guinea Tunisia Cape Verde Cameroon Guinea-Bissau Liberia Djibouti Kenya Namibia Gambia Senegal Congo Rep. Libya Angola Benin Congo DR Sudan Legislation Restructuring Policy Oversight Private Sector Involvement

25 Key reform issues Easy wins Improve management. The Mombasa port can be substantially upgraded, even with the current infrastructure, including through (i) full and effective 24hr port operations; (ii) the implementation of a state of the art IT system (Port Community-Based System); (iii) the concessioning of berths through a competitive and transparent process; (iv) the establishment of a landlord port. Infrastructure upgrading Focus on transport connections. Transfer of goods through Mombasa and other parts of Kenya has become a major hindrance to the economy. Key improvements include the (i) Mombasa by-pass along with the link road from the port; (ii) upgrading of rail capacity; (iii) building of new container terminal by 2015

26 Thank You For more information on this report and the World Bank s Economic program in Kenya, please contact Wolfgang Fengler (wfengler@worldbank.org), Jane Kiringai (jkiringai@worldbank.org) or Andrew Roberts (aroberts@worldbank.org)