The impacts of the Africa Continental Free Trade Area on the Kenyan economy

Employing an economy-wide model (JRC DEMETRA), the analysis provides a detailed characterization of the AfCFTA impacts on the Kenyan economy in the 2021-2035 timeframe. It considers two liberalization scenarios — tariff-only liberalization and tariff&Non-Tariff Measures (NTMs) liberalization — across four potential liberalization schedules defined by alternative government revenue, food security and economic development objectives. To capture the responses to the AfCFTA establishment occurring outside Kenya, results from a continental-level assessment are linked to the DEMETRA model to determine changes in international markets. The study findings show that the tariff-only liberalization leads to moderate positive outcomes, encouraging trade in commodities where Kenya already has a comparative advantage, namely cash crops. Moreover, there is a decrease in the production of food crops which are substituted by their imported variety signalling an increase in import dependency in this area. The tariff&NTMs liberalization induces a more significant reduction in trade costs thus stimulating trade. Exports of cash crops continue to have the highest expansion rate followed by manufacturing products. At the same time, there is an important growth of imports in manufacturing and processed food, which determines the output of many activities in this area to reduce relative to baseline values.