Kigali — In the wake of the recent rebasing of estimates of gross domestic product (GDP) by Ghana and Nigeria, Kenya is now the latest African country to rebase its national accounts data.
Although not on the same scale as the adjustment made in the Nigerian gross domestic product (which resulted in an approximate doubling in the size of its economy), the increase is nonetheless still highly significant - a 25.3 percent increase in its GDP, according to the Kenyan Planning Minister Anne Waiguru.
The increment was generally the product of revaluations of real estate, agriculture, manufacturing, and financial and insurance services. According to the Kenya National Bureau of Statistics, Kenya's "rebased" GDP for 2013 is now estimated at a nominal $55.2 billion (compared to $44.1 billion before the revision).
This boost in GDP will make Kenya the ninth-largest economy in Africa and classifies it as a middle-income country, since its gross national income (GNI) per capita, $1,160, has surpassed the current World Bank threshold of $1,036 to qualify.
"I have long been advocating for more accurate statistics, which portray Africa in its true light. In this sense, the rebasing of the Kenyan economy is something we should all welcome. Kenya is one of the most important economies in East Africa, and what happens there is of regional importance," said Carlos Lopes, Executive Secretary of the Economic Commission for Africa (ECA).
In line with the UN Statistical Commission (UNSC), which recommends that countries rebase their GDP every five years, Lopes stressed that it is crucial that such rebasing exercises are conducted on a regular basis. "I welcome the fact that both Tanzania and Uganda are also planning to rebase their GDP estimates before the end of the year. It will imply an appreciable revaluation of the size of the East African Community's economy - and hopefully this will entail a much better appreciation by investors of the potential investment opportunities within one of Africa's most dynamic markets, the EAC," he said.
Because GDP is the denominator used in many common macroeconomic variables, rebasing will also inevitably change perceptions about how the economy is performing. For instance, public expenditure as a percentage of GDP will now be significantly lower in the Kenyan case. A number of observers have also drawn attention to the fact that it may help economies like Kenya access international capital markets, as the existing debt levels as a percentage of GDP are now lower after the rebasing exercise.
"This is a not totally accurate", stresses Lopes, "because while existing debt levels will seem more modest, fiscal revenue as a share of GDP will also decline - and as far as sovereign debt goes, this is the salient indicator which well-informed foreign investors will look at".
