Despite the gloom surrounding Kenya’s economy, the country has emerged among the top 20 markets that have demonstrated impressive progress in trade growth potential in the last decade.
Kenya has been ranked position 3 in the top 20 markets with the greatest potential for future trade growth by the Trade20 Index report released by Standard Chartered Bank.
In the report, the East African economic hub is joined by Côte d’Ivoire and Ghana, making them the three markets leading the way for Africa.
Kenya still a shining hope
According to the report, this cluster of African economies show substantial momentum in trade growth potential, placing them at the very top of the Trade20.
“Nations that were lacking this momentum not long ago are now growing and modernising their economies,” notes the report.
“The particularly strong trade readiness exhibited by Côte d’Ivoire and Kenya is driven by improvements to their business environments, with enhanced digital and physical infrastructure, and moves to improve their ease of doing business.”
Kenya’s impressive potential for trade growth suggests that focusing on boosting manufacturing activities, achieving universal health coverage, improving food security and supporting the construction of affordable housing is driving the country’s increased trade growth potential.
The report ranks Kenya’s trade readiness score as ‘particularly high’ due to “infrastructure and ease of doing business improvements that far surpass most other African nations in our index”.
Kenya has successfully attracted external investment for substantial infrastructure development, including renewable energy projects.
“Improvements in Kenya’s ease of doing business ranking over the last few years have been driven by governmental reforms, including in the areas of starting a business, access to electricity, registering property and protecting minority investors,” said Standard Chartered Kenya CEO, Kariuki Ngari.
The report identified these markets by measuring changes in 12 metrics across three pillars of economic dynamism (foreign direct investment, export and GDP growth), trade readiness (infrastructure, e-commerce and ease of doing business) and export diversity (the range of exports).
The new research notes that Côte d’Ivoire is the market that has most rapidly improved its trade growth potential over the past decade out of the 66 markets around the world including China and India.
New foray for African countries
The report notes that African economies are making particularly strong progress from a relatively low starting point.
It points out that existing trade powers like China and India continue improving their trade potential.
Kenya, for instance, is consolidating its position as the trading hub of East Africa, while Côte d’Ivoire is cementing its position as a West African trading hub.
“Ghana also performs well in the index, placing just outside the top 10.”
The report findings for African markets show that Côte d’Ivoire and Kenya have significantly improved their trade readiness. This demonstrates that investments in infrastructure and business environment improvements are paying off, according to the report.
“Côte d’Ivoire and Ghana also fare well for economic dynamism, with Côte d’Ivoire enjoying robust GDP and export growth, and Ghana seeing an influx of FDI,” notes the report.
World’s fastest-growing economies
The report indicates that Africa has the potential to become a much bigger player on the global trade stage.
The continent is home to some of the world’s fastest-growing economies which can grow even bigger.
“Already connected with the trading powers in Asia, particularly China, through the Belt & Road Initiative (BRI), and with the launch of the African Continental Free Trade Area (AfCFTA), we see numerous growth opportunities for trade and investment in the years ahead,” said Philip Panaino, Transaction Banking Head, West, Standard Chartered Bank.
Additionally, Panaino says, “the growing young, digitally-savvy population and an increasing female workforce will aid in the continent’s economic transformation.”
The Trade20 Index examines the major global economies plus the major economies in each region to reveal the 20 economies that are most rapidly improving their potential for trade growth.
“While most traditional trade indices are based on a market’s present performance, the Trade20 index captures changes over time to reveal the markets that have seen the most improvement within the last decade. This enables us to identify the economies where recent positive developments may point to an acceleration in trade growth potential.”
The report adds that 15 of the Trade20 markets are in Asia-Pacific, Africa or the Middle East with emerging markets dominating.
Rapid urbanisation and growing middle-class populations are spurring infrastructure spending and improvements to the business environment.
“With world trade growth under threat from rising protectionism, it is encouraging that many emerging markets are still improving their trade growth potential for the medium and long term,” notes the report.
Many of these economies have also signed, or are negotiating, new trade agreements with the EU or regional agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Regional Comprehensive Economic Partnership (RCEP) and the AfCFTA.