Capital Economics raises concerns over accuracy of Kenya’s official GDP figures

[RVtitem]

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[hk]

http://kenyanwallstreet.com/capital-economics-raises-concerns-accuracy-kenyas-official-economic-figures

I dont know whether numbers are being fudged but its clear economy is decelerating . Credit growth is at 2%, business activity at 47.3% declining from 49% . The economy is being propped up by government spending and FDI.

[RV Pundit]

I didn't see any capital economic but some third rate blogger. There are many pseudo-data that KNBS use to check the numbers. One of the best is cement consumption - it's best indicator of economic activity - in  developing country. Then you can look at other expenditure items.

It expected in an election year that people will adopt wait n see - so this year the economy will grow at low rate - but it will pick up.  I think GOK has a lot more capacity to grow the economy through public investment. For long we have depended on private/informal sector -consumption-driven - to grow the economy. This will give us the usual 5%. If we had 3 SGRS type mega project each year -contributing 1.5% of GDP - we are talking 5% (from public investment) to be added to the usual 5%...and we would grow at 10% like Ethiopia or China.

[MOON Ki]

It expected in an election year that people will adopt wait n see - so this year the economy will grow at low rate - but it will pick up.  I think GOK has a lot more capacity to grow the economy through public investment. For long we have depended on private/informal sector -consumption-driven - to grow the economy. This will give us the usual 5%. If we had 3 SGRS type mega project each year -contributing 1.5% of GDP - we are talking 5% (from public investment) to be added to the usual 5%...and we would grow at 10% like Ethiopia or China.

The claim of the SGR contributing the 1.5% annually was always a bogus one.   Someone in GoK deliberately  twisted or seriously misunderstood a statement by the World Bank and ran with the story.  But GoK itself appears to have dropped that line once there had been at least one year of SGR construction, and the results were in: if you actually look at detailed KNBS data, in no year could SGR have contributed that much, even on the assumption that it made up the entire construction industry for that year.

So, to yours of 3 SGRs, each bringing in 1.5% per year ... added to the usual 5% ... and, lo and behold, 10%.  Kama Ethiopia na China.  Simple like that.  Well, we have already finished one SGR.  Let's take a look.

Kenya GDP growth rates

2013: 5.7%
2014: 5.4%
2015: 5.7%
2016: 5.8%
2017: 5.5% (projected)

[Globalcitizen12]

so what growth rate do we need to achieve Mugo Kabati's 2030 vision? Pundit is funny. He takes something and conceptualizes it then blurts out in every argument as hard truth without vetting  this "truth" he has been harping about this 1.5% bump by SRG. Now he wants Kenya to build 3 SGRS to get to the magic 10%.. Even the CHinese have found the hard way that you cannot go building shit around without proper planning because at the end of day it encourages misuse of resources..

Kenya needs to deliver 10% growth to justify SGR

Pundit we may as well build a Nuclear bomb and several nuclear power stations.. why not Kenya can just print money and lend to banks and citizens via MAkiba.

[RV Pundit]

Bla bla sitaki kusikia..make your useless points without pundit or Kalenjin this or that.Kenya has a huge infrastructure deficit that can benefit from public capital investment in the same...we have only 15% of the road under tarmac ..huge problem in water n sanitation.. little investment in railways, port, airports,power station...Gok should borrow and invest heavily in closing that deficit..and economy will grow 10 % during construction and after

so what growth rate do we need to achieve Mugo Kabati's 2030 vision? Pundit is funny. He takes something and conceptualizes it then blurts out in every argument as hard truth without vetting  this "truth" he has been harping about this 1.5% bump by SRG. Now he wants Kenya to build 3 SGRS to get to the magic 10%.. Even the CHinese have found the hard way that you cannot go building shit around without proper planning because at the end of day it encourages misuse of resources..

Kenya needs to deliver 10% growth to justify SGR

Pundit we may as well build a Nuclear bomb and several nuclear power stations.. why not Kenya can just print money and lend to banks and citizens via MAkiba.

[MOON Ki]

so what growth rate do we need to achieve Mugo Kabati's 2030 vision?

The World Bank did an analysis and around late-2015/early-2016 wrote a couple of fat reports on such matters.    According to them, Vision 3020 2030 requires a sustained 7% per year from now until 2030.    On the current path, it's very hard to see that happening.

[RV Pundit]

It expected in an election year that people will adopt wait n see - so this year the economy will grow at low rate - but it will pick up.  I think GOK has a lot more capacity to grow the economy through public investment. For long we have depended on private/informal sector -consumption-driven - to grow the economy. This will give us the usual 5%. If we had 3 SGRS type mega project each year -contributing 1.5% of GDP - we are talking 5% (from public investment) to be added to the usual 5%...and we would grow at 10% like Ethiopia or China.

The claim of the SGR contributing the 1.5% annually was always a bogus one.   Someone in GoK deliberately  twisted or seriously misunderstood a statement by the World Bank and ran with the story.  But GoK itself appears to have dropped that line once there had been at least one year of SGR construction, and the results were in: if you actually look at detailed KNBS data, in no year could SGR have contributed that much, even on the assumption that it made up the entire construction industry for that year.

So, to yours of 3 SGRs, each bringing in 1.5% per year ... added to the usual 5% ... and, lo and behold, 10%.  Kama Ethiopia na China.  Simple like that.  Well, we have already finished one SGR.  Let's take a look.

Kenya GDP growth rates

2013: 5.7%
2014: 5.4%
2015: 5.7%
2016: 5.8%
2017: 5.5% (projected)

Here you go with usual hairsplitting..so SGR which is 320b investment has contributed nothing during it's construction.

[RV Pundit]

We already achieved that..when we rebased and become low middle income country.The rebased growth rate average around that..and when we rebase again in near future we will discover we grew faster than we thought..the aim now is 5000 usd per capita..South Africa standard and we will get there before 2030.

so what growth rate do we need to achieve Mugo Kabati's 2030 vision?

The World Bank did an analysis and around late-2015/early-2016 wrote a couple of fat reports on such matters.    According to them, Vision 3020 2030 requires a sustained 7% per year from now until 2030.    On the current path, it's very hard to see that happening.
[/quote]

[MOON Ki]

Here you go with usual hairsplitting..so SGR which is 320b investment has contributed nothing during it's construction.

Yep.   Still, the difference between 5% and 10% is one heck of a thick hair, as I'm sure you will agree.   

By the way, nowhere have I stated or even implied that the construction of the SGR has not contributed anything during its construction.     I have, however, given the figures for various years, and I will leave it to those who can do their arithmetic to come to their own conclusions on

3 SGRs @ 1.5% each + usual 5% = 10%

Just like Ethiopia and China.

[MOON Ki]

We already achieved that..when we rebased and become low middle income country.The rebased growth rate average around that..and when we rebase again in near future we will discover we grew faster than we thought..the aim now is 5000 usd per capita..South Africa standard and we will get there before 2030.

More vodoo economics?   

First, the World Bank issued those reports in early 2016, which was after rebasing; the 7% growth per year until 2030 was given for the years 2016 to 2030.  So, right off the bat, "we have already achieved that" doesn't fly.   The future vs. the past sort of thing ...

Second, you have some very "interesting" ideas of what rebasing is all about.  GDP figures re-calculated after  rebasing may be higher or lower than the old figures; there is no basis to assume that they will necessarily be higher.    Please go to this KNBS webpage:

https://www.knbs.or.ke/highlights-of-the-revision-of-national-accounts/

Go to page 12 of the report entitled "Information on the Revised National Accounts".   There you will find both old and new (post-rebasing figures), which are:

2007: old = 7.0%, new = 6.9%
2008: old = 1.5%, new = 0.2%
2009: old = 2.7%, new = 3.3%
2010: old = 5.8%, new = 8.4%
2011: old = 4.4%, new = 6.1%
2012: old = 4.6%, new = 4.5%
2013: old = 4.7%, new = 5.7%

So, when you say that "the rebased growth rate average around that", what exactly are you referring to, and why is it not known to KNBS and the World Bank (which in its analysis considered rates over several decades)?

[RV Pundit]

Common sense. Most of the re-basing in Kenya and in Africa has generally discovered the economy had been under-estimated. I don't think that will change. This is because of huge informal sector that remain un-measured - even with the re-basing - there is a lot of informal black market economy KNBS cannot effectively measure. Leave alone our below standard data collections..for example..lots of people growing food for their own consumption...hard to pin down.

If you remove the 2008-2009 progrom - the re-basing averages 6-7%. You haven't even factored 1) poor record keeping/data collections 2) informal market - so as we re-base more (5yrs is the UN standard - but we still do 10yrs) - formalize the economy - expect us to reach middle income sooner than 2030.

More vodoo economics?   

First, the World Bank issued those reports in early 2016, which was after rebasing; the 7% growth per year until 2030 was given for the years 2016 to 2030.  So, right off the bat, "we have already achieved that" doesn't fly.   The future vs. the past sort of thing ...

Second, you have some very "interesting" ideas of what rebasing is all about.  GDP figures re-calculated after  rebasing may be higher or lower than the old figures; there is no basis to assume that they will necessarily be higher.    Please go to this KNBS webpage:

https://www.knbs.or.ke/highlights-of-the-revision-of-national-accounts/

Go to page 12 of the report entitled "Information on the Revised National Accounts".   There you will find both old and new (post-rebasing figures), which are:

2007: old = 7.0%, new = 6.9%
2008: old = 1.5%, new = 0.2%
2009: old = 2.7%, new = 3.3%
2010: old = 5.8%, new = 8.4%
2011: old = 4.4%, new = 6.1%
2012: old = 4.6%, new = 4.5%
2013: old = 4.7%, new = 5.7%

So, when you say that "the rebased growth rate average around that", what exactly are you referring to, and why is it not known to KNBS and the World Bank (which in its analysis considered rates over several decades)?

[RV Pundit]

And have you interrogate what drove growth - as HK says above - the private sector has been bleeding - and what is growing the economy is public investment (SGR) and FDI - obviously that 320B divided by 3 - mean GDP improved by 100B every year - that is about how much tea (our biggest export & forex earner) or tourism or horticulture - brings.

Of course it hard to measure with accuracy the % of GDP from SGR - but assume 100B worth of GDP - if you have 3 or more 100B worth of investment happening at same time - then we can easily get 5% from such infrastructure projects - and grow at 10%.

This is what Ethiopia is doing. It has a puny private sector.

Yep.   Still, the difference between 5% and 10% is one heck of a thick hair, as I'm sure you will agree.   

By the way, nowhere have I stated or even implied that the construction of the SGR has not contributed anything during its construction.     I have, however, given the figures for various years, and I will leave it to those who can do their arithmetic to come to their own conclusions on

3 SGRs @ 1.5% each + usual 5% = 10%

Just like Ethiopia and China.

[MOON Ki]

Common sense.

Since we are talking about numbers, i.e. percentages etc., I prefer to go by numbers.

If you remove the 2008-2009 progrom - the re-basing averages 6-7%.

Even if I did that and came up with such figures, it matters little, because the 7% is about the years 2016 to 2030.

[RV Pundit]

We are averaging 6% - and we are already off-base - once we get census data done in 2019 - we can rebase again in 2021 - and discovered we understimated by 1-2% every year - meaning - we should be fine.

Even if I did that and came up with such figures, it matters little, because the 7% is about the years 2016 to 2030.

[MOON Ki]

We are averaging 6% - and we are already off-base - once we get census data done in 2019 - we can rebase again in 2021 - and discovered we understimated by 1-2% every year - meaning - we should be fine.

Yes, maybe it's even better than we thought:

3 SGRs @ 1.5% + usual 6% (new figure) + 1-2% = ... let's not split hairs, and just say that it's 5%+6%+2% = 13%

How's that?

[RV Pundit]

Sounds great to me!

Yes, maybe it's even better than we thought:

3 SGRs @ 1.5% + usual 6% (new figure) + 1-2% = ... let's not split hairs, and just say that it's 5%+6%+2% = 13%

How's that?

[MOON Ki]

And have you interrogate what drove growth - as HK says above - the private sector has been bleeding - and what is growing the economy is public investment (SGR) and FDI - obviously that 320B divided by 3 - mean GDP improved by 100B every year - that is about how much tea (our biggest export & forex earner) or tourism or horticulture - brings.

Of course it hard to measure with accuracy the % of GDP from SGR - but assume 100B worth of GDP - if you have 3 or more 100B worth of investment happening at same time - then we can easily get 5% from such infrastructure projects - and grow at 10%.

Oh, forgot this one ... I'm afraid it doesn't help your case.

I didn't interrogate anybody or anything, but I did look at the KNBS data (Economic Survey Reports) that gives numbers for each sector of the economy.     The reports don't tell us how much SGR  contributed to the numbers given, but we know that it is included under "construction".   Whatever SGR contributed the economy, it could not have exceeded that of everything that falls under "construction".  So, take any year of SGR construction,  make the very generous assumption assumption that the figures given for "construction" all came from the SGR, and see what you get from that upper bound.  That's what I did.

If you don't care for all that number-crunching, this should give you a hint: take a look at the projected GDP growth rate for 2017, now that SGR has been completed.

[RV Pundit]

First SGR is not complete - Phase 2A - ongoing and they are busy drilling the Ngong/RV escarpment.
Secondly that SGR=Construction is pedestrian - SGR during construction -affect many sectors - from ports/clearing&forwarding/equipment/transports/minning&quarrying/banking/retails/hotels etc - then thing is 100B came in - for SGR construction - I don't know why you want to dice this - into construction industry.
During construction of 2A, 2B and 2C - we are assured of 100B annually - that is GDP growth - those are thousands of people in employment - either directly or indirectly - those are many vendors in business.

Now if we were to get 3 times such project going on - and I think we can still leverage until 60-70%  gdp/tax-- then we can be adding 300-400b every year to our economy- and that is GDP growth.

After construction - these brand new rails/roads/ports/power stations/air ports - can generate about the same or more GDP.

Oh, forgot this one ... I'm afraid it doesn't help your case.

I didn't interrogate anybody or anything, but I did look at the KNBS data (Economic Survey Reports) that gives numbers for each sector of the economy.     The reports don't tell us how much SGR  contributed to the numbers given, but we know that it is included under "construction".   Whatever SGR contributed the economy, it could not have exceeded that of everything that falls under "construction".  So, take any year of SGR construction,  make the very generous assumption assumption that the figures given for "construction" all came from the SGR, and see what you get from that upper bound.  That's what I did.

If you don't care for all that number-crunching, this should give you a hint: take a look at the projected GDP growth rate for 2017, now that SGR has been completed.

[Nefertiti]

Obviously the infrastructure plans should continue - with proper thinking about debt conditions - but the private sector needs to be addressed. No reason the drivers of FDIA cannot appeal to private sector. The issue is credit - and I think it is wrong that GoK borrows heavy from the public or banks... instead of the two latter running credit market themselves. M-Akiba is not all hailmary like you have been telling us.