This note reviews the performance of keysectors of the Kenyan economy after the power-sharingarrangement of 2008. Declines in the agricultural,manufacturing, and services sectors considered in this noteare estimates. Data collected and information interpretedprovides picture of the broad orders of magnitudeanticipated of the economic decline. Assuming that thepower-sharing arrangement holds and the country returns tonormalcy, a base case economic growth rate of about 3percent could be expected for 2008. If a credible set ofmeasures is steadily implemented and the fiscal constraintis managed well, these could add 1-1.5 percentage points tothe base case rate of 3 percent. On the downside, continuedsporadic ethnic violence, inability of coalition governmentto reach key decisions, and lack of donor support couldresult in zero or negative growth rates in 2008. The note isorganized as follows. Sections I and II present the macroeffects of the crisis and sectoral developments which arethen used to calculate the real output expectations in 2008,as well as discuss factors that would determine the extentto which longer term prospects also are affected. SectionIII focuses on the poverty situation. Fiscal issues aretaken up in section IV. External accounts are discussed insection V. Financial markets and issues related to investorconfidence are in section VI.
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