Influence of Gas Consumption on Economic Growth in Kenya

Abstract

Every sovereign nation’s goal is to raise the standard of living for its citizens by promoting economic growth. Economic growth is all about increasing productivity which is determined by many macroeconomic variables where energy consumption is a key variable. Kenya uses energy in most of its sectors in order to enhance production. According to Kenya’s Vision 2030, Kenya aimed to achieve an average GDP of 10% per annum beginning the year 2012. However, achieving this economic growth rate has been unfeasible. Kenya’s economic growth rate has been unimpressive and often fluctuating. The purpose of this study was to analyze influence of gas consumption on economic growth in Kenya. The study period was 2008-2020. Neo Classical growth and Depletion theories were employed. Explanatory research design was employed. Secondary data sourced from the World Bank database. General Method of Moment (GMM) model was adopted. Over identifying test and normality tests were conducted before making inferences. Both descriptive and inferential statistics were carried out. Results were presented in form of graphs and tables. The results indicated that coefficient of gas consumption was -2.1673, p=0.024. This implied that 1% increase in gas consumption would result in a reduction of GDP growth rate by 2.1673%. The study observed that gas consumptions influenced economic growth in Kenya. Government should consider the supply of gas and the nature of subsidy available so that the effect of gas consumption coefficient be reversed in order to have positive effect on economic growth rate. Findings of this study could be utilized by government in budget making process in the parliament or ministerial preliminary budgets and in the allocation of funds to various sectors that require substantial energy input. Additionally, findings could assist the government in order to expand current sources and exploit the other sources of energy such as solar energy, wind energy, thermal energy so as to increase the production and consumption of energy in order to increase economic growth rate. Policy makers could use these findings to establish gas policies that are realistic, time bound and those that enhance sustainable economic growth in Kenya. Finally, academicians could use the results in future references and scholarly studies in creating new angle of thinking and doing things.