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Kenya Economic Update, October 2018: In Search of Fiscal Space

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dc.contributor.authorWorld Bank Group
dc.date.accessioned2018-10-23T21:23:21Z
dc.date.available2018-10-23T21:23:21Z
dc.date.issued2018-10-01
dc.description.abstractThe Kenyan Economy is on a rebound in 2018. Reflecting improved rains, better business sentiment and easing of political uncertainty, economic activity is rebounding after the slowdown in activity in 2017. According to official statistics, the economy expanded from 4.7 percent in H1 of 2017 to 6.0 percent in H1 of 2018 supported by improved harvest in agriculture, steady recovery in industrial activity, and still robust performance in the services sector. As a result, real GDP growth is projected to reach 5.7 percent in 2018, an upward revision of 0.2 percentage points from the April 2018 Economic Update. Growth in private consumption and investment are driving the rebound. Private consumption picked up in 2018 fueled by rising household incomes from improved agricultural harvests, lower food prices, and strong remittance inflows. A recovery in private sector investment activity is also underway, partly reflected in increased imports of raw materials and chemicals and more positive investor sentiment with the Purchasing Managers’ Index remaining in expansionary territory (above the 50- mark) for H1 2018 at 55.1 points compared to 49.7 points over the same period in 2017. The recovery in private sector activity (consumption and investment) is expected to off-set potential drag in growth due to unwinding of fiscal stimulusat a time when fiscal consolidation is gathering momentum. Net exports continued to weigh on growth owing to faster expansion in imports relative to Kenya’s exports. There are three key policy recommendations from this analysis. First, the government could consider expanding direct cash transfer programs. Cash transfer programs are well-targeted so that a large fraction of the benefits are captured by the poor. These programs could further be expanded in order to increase their poverty-reducing effect. However, this will require enhancing revenue mobilization for the coverage to increase significantly. Second, exemptions granted within Kenya’s VAT regime appear to benefit the poor only marginally. The variation in consumption shares of exempt and zero-rated items across the welfare distribution is small. A review of the VAT law might help remove exemptions and increase revenue that could then be spent in well-targeted and progressive cash transfer programs. However, a more detailed follow-up analysis of exemptions and zero-rates would be necessary to determine item-level incidence. Third and finally, shifting public resources from higher-level health facilities to lower-level facilities is likely to benefit the poor. Conditional on uptake, public health spending on outpatient care is pro-poor while the associated user fees and over the counter purchases are regressive. The results suggest that redirecting spending from higher-level public health facilities to primary care facilities has the potential to benefit the poor and might increase access.en
dc.identifierhttp://documents.worldbank.org/curated/en/766271538749794576/In-Search-of-Fiscal-Space-Government-Spending-and-Taxation-Who-Benefits
dc.identifier.doi10.1596/30597
dc.identifier.urihttps://hdl.handle.net/10986/30597
dc.languageEnglish
dc.publisherWashington, DC: World Bank
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC OUTLOOK
dc.subjectFISCAL TRENDS
dc.subjectAGRICULTURE
dc.subjectINVESTMENT
dc.subjectOIL PRICES
dc.subjectREMITTANCES
dc.subjectPOVERTY REDUCTION
dc.subjectEQUITY
dc.subjectSOCIAL SPENDING
dc.subjectCASH TRANSFERS
dc.subjectEDUCATION SPENDING
dc.subjectHEALTH SPENDING
dc.subjectTAXATION
dc.subjectINEQUALITY
dc.titleKenya Economic Update, October 2018en
dc.title.subtitleIn Search of Fiscal Spaceen
dc.typeReporten
dc.typeRapportfr
dc.typeInformees
dspace.entity.typePublication
okr.crossref.titleKenya Economic Update, October 2018
okr.date.disclosure2018-10-10
okr.doctypeEconomic & Sector Work::Economic Updates and Modeling
okr.doctypeEconomic & Sector Work
okr.docurlhttp://documents.worldbank.org/curated/en/766271538749794576/In-Search-of-Fiscal-Space-Government-Spending-and-Taxation-Who-Benefits
okr.guid766271538749794576
okr.identifier.doi10.1596/30597
okr.identifier.externaldocumentum090224b0864f37a1_3_0
okr.identifier.internaldocumentum30475360
okr.identifier.report130556
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/766271538749794576/pdf/130556-WPN-P162368-KenyaEconomicUpdateFINAL.pdfen
okr.region.administrativeAfrica
okr.region.countryKenya
okr.topicPublic Sector Development::Public Sector Expenditure Policy
okr.topicMacroeconomics and Economic Growth::Economic Growth
okr.topicMacroeconomics and Economic Growth::Fiscal & Monetary Policy
okr.topicPoverty Reduction::Access of Poor to Social Services
okr.topicPoverty Reduction::Achieving Shared Growth
okr.topicPoverty Reduction::Inequality
okr.unitEast Africa (GMTA3)
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