The 19th edition of the Kenya Economic Update explores how to unbundle the slack in private sector investment to transform agriculture sector productivity and linkages to poverty reduction. This World Bank report comes against a backdrop of a strong rebound in Kenya’s GDP growth supported by favorable harvests in 2018, improved investor sentiment and a stable macroeconomic environment. Nonetheless, delays in the March-May 2019 rainy season and a growing need for emergency interventions to deal with food shortages in several counties is a reminder of the outstanding challenges in managing agricultural risks in Kenya. Against this background, the Special Focus topic makes a timely contribution by highlighting a few of the many factors underlying low agricultural productivity and what can be done to transform the sector and deliver on food and nutritional security.
The report has three key messages. First, the Kenyan economy rebounded in 2018-thanks to a recovery in agriculture and a still resilient services sector. Nonetheless, the demand side shows significant slack with growth driven purely by private consumption as private sector investment lags and government spending is slowing due to planned fiscal adjustment. Second, boosting credit growth to the private sector and improving fiscal management could help strengthen aggregate demand and economic growth. Third, and regarding the Special Focus topic, a two-pronged policy suggestion is proposed, including measures to transform agricultural productivity and initiatives to boost farmer’s income with improved farm gate prices.