No abstract

The role of exports in promoting economic growth has been widely acknowledged. This paper analyses the link between exports, imports, and growth performance in Kenya using time series data. Despite trade liberalization and export promotion policies pursued over time, Kenya's export growth has been sluggish, and exports are still strongly geared toward primary agricultural goods. Furthermore, empirical results show that aggregate exports have no statistically significant effect on output growth; instead, output growth is influenced by imports. Moreover, the diversification of imports has a larger impact on output growth than exports' diversification. Although analysis using disaggregated data shows the positive impact of machinery exports on output growth, the impact is smaller than that of imported manufactured and agricultural commodities. Therefore, the results generally suggest import-led growth and not export-led growth, signifying the economy's dependence on imports. There is a need to revamp the export-led growth strategy by enhancing export competitiveness, increasing value-addition, export diversification, and leveraging regional and global value chains.

This study has been prepared within the UNU-WIDER project Varieties of structural transformation.