Kenya’s GDP growth slows to 5.0 percent in Q2 of 2017

Kenya’s economy expanded by 5.0 percent in the second quarter compared with 6.3 percent in the same period in 2016 according to the Kenya National Bureau of Statistics (KNBS).

Genghis Capital Analysts state that 1Q17 GDP growth settled at 4.70 percent y/y weighed down by a contraction in Agriculture sector and a slowdown in the Construction sector.

“With the second quarter weighed down by  reduced output, as depicted by Purchasing Managers Index (PMI) indicator which averaged 49.17 in 2Q17 from 50.20 in 1Q17, ahead of the August poll and  persistent slowdown in private sector credit growth, we are not expecting 2Q17 growth rate above 5.00 percent.”

The KNBS in a statement noted that agriculture sector contracted by 1.7 percent from growth of 7.1 percent  in 2016, while accommodation and food services grew by 13.4 percent, down from 15.8 percent in the previous year.

“Performance of the agriculture sector was exacerbated by widespread drought experienced during the fourth quarter of 2016 and somewhat suppressed long rains in 2017 that considerably affected crop production and rearing of animals.”

“This led to a notable slowdown in the manufacture of food as agro-processing was negatively affected by the constrained supply of food products. Electricity generation was also greatly affected by reduced rains thereby necessitating increased use of thermal sources.”

“Growth in Financial Intermediation was also dampened by the effect of continued slow uptake of credit,” KNBS said.

Kenya’s current account deficit widened to Ksh134.8 billion in the quarter under review from a deficit of Ksh114.1 billion in the second quarter of 2016, the statistics office said.

Read: 

• Kenya’s National Treasury retains  inflation target range at 5pc
• Kenya’s growth forecast will not be less than 5pc in 2017 – CBK

During the quarter, the Kenyan Shilling marginally depreciated against the US dollar but appreciated slightly against the sterling pound. Performance of the Shilling against the Euro and the Japanese Yen remained largely unchanged during the quarter.

In the regional front, it depreciated against the South African Rand and Tanzanian Shilling but appreciated slightly against the Ugandan Shilling. Commercial bank lending rates dropped from an average of 18.15 percent in the second quarter of 2016 to 13.63 percent in the quarter under review.