Natalie Cowling
Research Expert South Africa
Kenya is one of the fastest growing economies in Africa. In 2022, the country ranked among the ten highest GDPs on the continent at 106 billion U.S. dollars. From a regional perspective, Kenya is also the powerhouse in East Africa. Recent political and economical reforms led the country to macroeconomic stability, controlled inflation, and a thriving services sector. The same as other countries worldwide, Kenya’s economy was hit by the COVID-19 pandemic in 2020, with the country’s GDP shrinking by 0.3 percent that year. The economy, however, already showed signs of recovery in 2021.
Agriculture: the economy’s engine
Agricultural activities account for more than 50 percent of the total employment in Kenya. Moreover, around 35 percent of Kenya’s GDP has its origin in the agriculture sector. Tea is a highly important commodity in the country and its main cash crop. Even though Kenya is currently not among the leading producers of tea in the world anymore, the country earned roughly 556 million U.S. dollars in tea exports the second half of 2022. Additionally, horticulture, mainly represented by cut flowers, and coffee are also large export earners. There are natural challengers to combat, and agricultural productivity has suffered from severe weather phenomena and locust attacks. The scenario contributes to an ongoing, but slow process of transition from an agriculture-based to a service-oriented economy.A resilient services sector
As of 2021, services contributed to more than 54 percent of Kenya’s GDP, with tourism as a key player in the sector. However, employment opportunities in the services industry were still less than in agriculture. Services had a share of nearly 39 percent of the total employment, a percentage that has been slowly growing in the last years. Overall, the unemployment rate was 5.5 percent in 2022, while approximately 18 million people were employed. More than 80 percent worked in the informal market, mostly in wholesale and retail trade, hotels, and restaurants.Consumption on the rise
Kenya has one of the largest consumer markets in Africa. In 2020, the household final consumption was at 76.3 billion U.S. dollars, up from 28.2 billion U.S. dollars in 2009. A rising middle class has driven the retail market, as well as e-commerce activities. In 2021, e-commerce revenue is projected to reach more than 1.5 billion U.S. dollars. Nevertheless, Kenya still has important challenges to overcome in order to reduce vulnerability to internal and external shocks, and pursue a higher level of growth inclusiveness. For instance, almost 70 percent of the population lacked money to buy food in 2019, a figure that, despite the strong economic development, steadily increased in recent years.
