This is the eleventh edition of theKenya Economic Update. The special focus of this updateexamines the structural factors underpinning the poorperformance of the manufacturing sector. Drawing on recentfirm-level data from the 2010 Industrial Census and the 2013Enterprise Survey. It investigates the extent to which thesector's lack of dynamism reflects problems inKenya's business environment, which compares poorly toregional neighbors' on several manufacturing-relevantdimensions. The report has four main messages: First, Kenyabegins 2015 in a sound economic position. After growing anestimated 5.4 percent in 2014, its economy is poised to beamong the fastest growing in the region, with growthprojected at 6.0 percent in 2015, 6.6 percent in 2016, and7.0 percent in 2017. Second, the external sector remainsweak and vulnerable, as import growth continue to outpaceexport growth and short-term flows finance the currentaccount deficit. The large deficit points to underlyingstructural weaknesses in Kenya's economy, which need tobe addressed. Third, Kenya needs to increase thecompetitiveness of the manufacturing sector so that it cangrow, export, and create much-needed jobs. As a share ofGDP, Kenya's manufacturing sector has been stagnant inrecent years, and it has lost international market share;lastly, the weak business environmentis a key constraint forthe manufacturing sector. Obstacles to doing business affectthis sector more than many others because manufacturingneeds access to capital for investments, infrastructure toimport inputs and export and distribute finished products,affordable and reliable electricity to produce, labor to manoperations, and fair and streamlined regulations and tradepolicies that allow firms to compete.
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