Global Trends and what they mean for Kenya in 2010 Mind Speak, Rich Management Dr. Wolfgang Fengler, Lead Economist World Bank, Nairobi 30. January 2010

2 Born in Germany in January 1971 Graduated from German Universities in 1996 (Masters) and 2000 (PhD) Founded a number of companies, including “Africa Consulting” in the 1990ies Left Germany and joined the World Bank in January 2000 Became Senior Economist for the World Bank in Indonesia in 2004 Moved to Kenya as World Bank Lead Economist in August 2009 Married to Petra Fengler; 3 children aged 5-8 About myself

Main messages Our generation is experiencing the most profound demographic transition ever: in 1970, the world had less than 4 billion people; by 2050 it will have more than 9 billion. We are also experiencing a geographic transition from rural to urban. But “growth will always be unbalanced but development can still be inclusive” (WDR 2009). Development is possible but it is not inevitable. Asia is rising – Africa continues to stagnate. Paradox Kenya. Strong private sector but poor growth.

4 Demographic shifts

The World will soon exceed 7 billion; working age population will continue to rise

Global population growth is driven by Asia and Africa …

… while Europe and North America’s share in global population is declining 7

Total Population Working Ages Youth 0-14 Older Population in thousands Kenya is growing by more than 1 million a year; by 2050, the country will exceed 85 million people

9 Geographic shifts

D ensity: Tokyo—the biggest city in the world  35 million out of 120 million Japanese, packed into 4 percent of Japan’s land area D istance: USA—the most mobile country  More than 35 million out of 300 million changed residence in 2006; 8 million people changed states D ivision: West Europe—the most integrated continent  About 35 percent of its GDP is traded, almost two thirds within the region The 3Ds: Density, Distance, Division

Concentration, a fact of life, Half of the world’s production…..

WDR Conference in Central Asia, February at the global spatial scale ….can fit onto 1.5% of its land, less than the size of Algeria

Economic map of the World – Africa is still absent but Asia has been reappearing 13

14 Kenya’s cities are growing rapidly

15 Development is possible but not inevitable

Globally, extreme poverty has declined significantly… Share of Population below US$ 1 a day; Source: Chen/Ravallion 2004

… but there is great regional variation

In Kenya, per-capita income recovered since after more than a decade of decline 18

19 KENYA’s economy in 2010

Kenya’s economy is dominated by services – and has always been New SNA methodology Source: Kenya National Accounts / WB Staff estimates; Please note that Kenya adopted SNA1993 and revised the GDP series. Starting the series reflects the structural break in the methodology and not changes in the trend.

Services have a much bigger role in the economy compared to Tanzania and Uganda 21

Kenya has experienced a decade of strong, but uneven, growth

Even though Kenya never received debt relief, debt levels declined from 60% to 40%

Kenya is not aid dependent: Only 5% of the budget is financed by partners

Kenya is experiencing an IT revolution Since 2008, IT and phone connections increased rapidly

Outlook 2010: A continuation of Kenya’s (slow) recovery with 3.5% growth

Kenya’s growth will be similar to the SSA average

… but remains below its neighbors

Danke Asante Sana Thank you