19 Sep 2022


The Relationship between GDP and the Kenya's Economy

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Kenya is among the developing nations in Africa. Fishing, agriculture and forestry are the biggest sector of the economy and accounts for about 20 percent of the country’s GDP. Industrialisation is the second and represents about 10% of the GDP. Some of the other sectors include financial and insurance about 8%, wholesale and retail business about 6%, education around 7% and transport 6% among others (Trading Economics, 2017). The remaining part is allotted to IT, administrative and support work and social work activities. So as to understand this country in terms of development, one must analyse its GDP. 

The GDP measures the country’s income as well as output for a given year. The GDP is equivalent to the total expenses for all end products and services produced in a country within a specific period. According to Trading Economics (2017), the Kenyan Gross Domestic Product (GDP) was worth $63 billion in 2015. This Gross domestic product signifies 0.10% of the global economy. Kenya’s GDP is averaged at $13.31 Billion from 1960 till 2015, hitting its highest point of all time at $63 Billion in 2015 (Trading Economics, 2017). The GDP in Kenya increased by 0.10% in the third quarter of 2016 as compared to the past quarter. GDP growth rate is averaged at 1.29% from 2005 till 2016. The GDP reached its highest point of 3.80% in the third quarter of 2010 while recorded low rate of -2.40% in the initial quarter of (Trading Economics, 2017). 

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Relationships between the GDP and Kenya’s Economy 

GDP has a strong influence on the prices of real estate in Kenya. The rate of economic growth dictates the growth or reduction of low income and middle-income earners. Odhiambo (2008) established that growth of GDP shows a significant relationship with returns on property. Given the significance of real estate, Odhiambo (2008) found a strong linkage between the GDP of Kenya and the real estate prices. This implies that a change in the housing prices significantly translates into a change in GDP. 

The researcher further established a relationship between GDP and stock market expansion. According to Odhiambo (2008), there exist a positive connection between GDP and stock market expansion in Kenya. The liquidity of stock market promotes economic development which in turn leads to increase the GDP percentage. On the other hand, an upsurge in stock capitalization leads to a reduction in Gross Domestic Product percentage. This means that the rate of economic growth in Kenya is always stabilized by the policy makers who come up with different ways to promote liquidity of stock market; hence, creating an enabling environment for stock development. 

The Trends in the Data Sets 

GDP Growth Rate 

The economy of Kenya has been increasing by 5.6% year-on-year in the third quarter of 2016. In 2015, the country registered a 6.3% increase in GDP in the third quarter. During this period, production grew at a slower speed. Agriculture had +3.8% from +5.5 % in third quarter of 2015, manufacturing (+1.9% from +3.2 %), construction (+9.2% from +15.5 percent), business segment (+6.2% from +10.2%), and water and electricity (+7% from +10%). On the contrary, transport sector, and food and accommodation sector increased by (+10% from +9%) and (+13.8% from -6.5%) respectively. On a seasonally modified quarterly base, the economy increased by 0.1%. GDP yearly growth rate in Kenya is averaged at 5.4% from 2004 to 2016. Between these periods, 2004-2016, the highest level ever registered in the GDP growth was 12.50% in the fourth quarter of 2010. However, in 2008, a shortfall of 0.2% was registered in the fourth quarter of the year 2008 (Trading Economics, 2017). 

Kenya – Gross Domestic Product per capita ($) 

In the second quarter of 2016, GDP increased by 6.2% in yearly terms from 5.7% in the first quarter, marking the quarter to be the fastest growth rate in almost four years. As compared to the previous quarter, GDP increased in the two consecutive quarters as indicated by a seasonally-adjusted rate of 1.9%. By observing the details keenly, the growth rate in the second quarter was highly supported by the wide-based growth in each sector of the economy. The major anchor of expansion was the agricultural segment which progressed from 5.2% in first quarter to a 5.5% upsurge in the second quarter. Others included retail and wholesale trade, storage and transportation, fishing and forestry (Focus Economics, 2017). Some of the sectors that increased most include accommodation and restaurants, mining and quarrying as well as water supply. Market analysts project a growing GDP which could rise further in 2017. 

The GDP per capita in Kenya was recorded at $2901.01 in 2015 when modified by purchasing power parity (PPP). This was equivalent to 16% of the globe’s average GDP per capita. The purchasing power parity in Kenya is averaged at $2358.12 from 1990 till 2015, reaching one of the highest levels of $2901.01 in 2015 while recording the lowest level of $2140.29 in 2002 (Focus Economics, 2017). The GDP per capita income is obtained by dividing the nation’s GDP, adjusted by buying power equivalence, by the total populace. 

In conclusion, the GDP measures the country’s income as well as output for a given nation’s economy. The liquidity of stock market promotes economic development which in turn leads to increase GDP percentage. While upsurge in market capitalization leads to a reduction in Gross Domestic Product percentage. On the current trends, the economy of Kenya rose by 5.6 % year-on-year in the third quarter of 2016, following a 6.3% increase in the similar period of 2015. 


Focus Economics. (2017). GDP per capita in Kenya . Retrieved from http://www.focus-economics.com/country-indicator/kenya/gdp-per-capita-USD. 

Odhiambo, N. M. (2008). Financial depth, savings and economic growth in Kenya: A dynamic causal linkage. Economic Modelling, 25 (4), 704-713. 

Trading Economics. (2017). Kenya GDP . Retrieved from http://www.tradingeconomics.com/kenya/gdp. 

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