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- GDP (PPP):
- $132.4 billion
- 5.3% growth
- 6.0% 5-year compound annual growth
- $3,084 per capita
- Inflation (CPI):
- FDI Inflow:
Kenya’s economy, one of Africa’s most developed, has gradually emerged from political instability and the economic slowdown. Reforms to improve management of public finance and enhance regulatory efficiency have continued, but progress has been sluggish. After lengthy delays, four measures to improve the business environment (the Companies Act, Insolvency Act, Business Registration Act, and Special Economic Zones Act) were signed into law in 2015.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 57.5 (up 1.9 points)
- Economic Freedom Status: Mostly Unfree
- Global Ranking: 115th
- Regional Ranking: 19th in Sub-Saharan Africa
- Notable Successes: Trade Freedom and Regulatory Efficiency
- Concerns: Property Rights and Corruption
- Overall Score Change Since 2012: No Change
Challenges to sustaining long-term economic development include the weak rule of law, which remains uneven across Kenya. Corruption is perceived as pervasive, and the judicial system remains vulnerable to political influence.
In March 2013, Uhuru Kenyatta won the first presidential election under a constitution promulgated in 2010. In 2014, the International Criminal Court dropped charges against him for crimes against humanity stemming from post-election violence in 2007. Kenya invaded Somalia in 2011 in pursuit of the Islamic fundamentalist group al-Shabaab and the next year formally joined the African Union coalition battling the terrorist organization. Since the invasion, Kenya has suffered a surge of terrorist attacks, and the government has responded by cracking down on the domestic Muslim population, the media, and non-governmental organizations. Kenya has experienced a moderate economic recovery since the 2007–2008 violence, but poor infrastructure, systemic corruption, high unemployment, and insecurity undermine development. China is funding several ambitious infrastructure projects.
Corruption remains a major impediment to doing business in Kenya. In March 2015, the president ordered dozens of government employees, including five ministers and other senior elected officials, to step down temporarily pending an anti-corruption probe. Weak institutional capacity undermines efforts to increase the transparency of procurement and other government activities. More than 10 percent of the land lacks clear title.
The top income and corporate tax rates are 30 percent. Other taxes include a value-added tax and a tax on interest. The overall tax burden equals 16.2 percent of GDP. Government spending amounts to 25.3 percent of total domestic output. The fiscal climate remains steady. The deficit has increased to over 5 percent of GDP, and public debt equals about 49 percent of total domestic output.
The business start-up process takes 10 procedures, and no minimum capital is required, but the cost of completing licensing requirements equals over twice the average annual income. The public sector employs much of the labor force. The government still regulates prices through subsidies, agricultural marketing boards, and state-owned enterprises. Subsidies from international donors are funding development of geothermal power.
Kenya’s average tariff rate is 9.7 percent. Imports of agricultural products face regulatory barriers. The government is involved in many state-owned enterprises. It may not expropriate private property without providing compensation. The financial sector remains vulnerable to government influence. The state owns or holds shares in several domestic financial institutions and continues to influence the allocation of credit.