Agriculture and Improved Business Sentiment Drive Kenya’s Economic Growth Up by 6.0% in 2018

Kenya’s economic growth for the first three quarters of 2018 expanded by 6.0 percent on a year-on-year basis compared to 4.7 percent registered in the same period in 2017, says the Kenya Economic Update 2019.

The growth was attributed to improved agriculture and positive business environment as well as the recovery in the private consumption as a result of better returns from a copious harvest, strong remittance inflows, and lower food prices.

According to the report, a healthy pick-up in economic activity continues in the first quarter of 2019, partly reflecting solid real growth in consumer spending and stronger investor sentiment.

However, the emerging drought conditions could curtail GDP growth in the remainder of 2019.

Agricultural Sector

Weather conditions in 2018 were fairly stable contributing to a strong agricultural output that pushed the GDP contribution from 0.3 percent in 2017 to 1.3 percent over the same period under review in 2018.

The report, however, notes that due to delays in precipitation in 2019, agricultural production could be greatly reduced.

See Also Prolonged Drought Hurting Kenyan Households as Commodity Prices Heighten

Worth noting is how Kenya’s Real agricultural value added has decreased relative to what was realized in 2016. The report attributes the decline to weather shocks, the prevalence of pests and disease, and dwindling knowledge delivery systems.

Nevertheless, the agricultural sector accounts for the majority of income for rural households and it contributed to about 30 percent to the reduction of poverty among poor rural households.

Industrial Sector

The industrial activity in the country is gradually picking up, thanks to rejuvenated business sentiment, improved private consumption, and favorable external demand from the EAC and COMESA regional markets.

The GDP contribution rose from 0.5 percent registered in the first three quarters of 2017 to 1.0 percent over the same time in 2018 as the stats below indicate.

The manufacturing sector GDP contribution remains below its historical trend of at least 1.2 percent. Contrarily, the sector has recovered as a result of improved food and non-food manufacturing activities.

Whereas there was an increase in electricity consumption and imported raw materials by 3 and 28 percent, respectively in 2018, the imports of machinery and equipment contracted by about 6 percent indicating a gradual recovery in industrial production.

Read Kenya Economic Update: Transforming Agricultural Productivity to Achieve Food Security for All

Meanwhile, the growth in the construction sector was about 6.7 percent in 2018 on account of ongoing public sector infrastructure and a recovery in credit flows to the sector. Also, growth in electricity and water sub-sectors increased from 5.5 percent in 2017 to 7.4 percent in 2018.

Service Sector

Although it still accounts for at least half of the country’s GDP, there is a considerable slowdown in the financial services sub-sector.

The economic growth performance across the main sub-sectors was broadly strong where the economic activity in wholesale and retail trade, accommodation and transportation sub-sectors, as well as the ICT and real estate sub-sectors,  remained buoyant.

However, reflecting an anemic business environment for the financial services sector, including the introduction of interest rate caps, growth decelerated from 4.4 percent in 2017 to 2.5 percent in 2018.

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