The Revival In Tourism And Financial Services Drove Kenya’s Real GDP Growth In 2022

Services increased by 7.0 percent y/y in 2022, contributing about 80 percent of the increase in total GDP. While this sound services growth was broad-based, the main drivers were financial intermediation and tourism.

Financial services increased by 12.8 percent y/y in 2022 due to strong private sector credit growth and lending to the government. Tourism staged a forceful recovery, reflected in a sharp rise in hotels and restaurants, and transport subsectors.

With pandemic-related domestic and global mobility and travel restrictions fully lifted, the number of international visitor arrivals increased from 871.3 thousand in 2021 to 1,541.0 thousand in 2022 leading to significant improvement in hotel bed occupancy, number of international conferences, and the number of visitors to museums, national parks, and historical sites.

Nonetheless, labor market statistics show that wage employment in hotel and food services remains below pre-pandemic levels.

Other major contributors to growth included wholesale and retail trade, real estate (supported by the sustained expansion of the construction industry), and information and communication (driven by increases in wireless internet and fiber-to-home subscriptions).

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Industry endured several domestic and external challenges— including lower agricultural produce, policy tightening, the rising cost of living pressures, a weakening currency, and a slowing global economy— to expand by 3.9 percent y/y in 2022 compared to 7.5 percent y/y in 2021.

Manufacturing, which accounts for nearly half of the industrial sector output, recorded deceleration in 2022 as the setbacks in crops and livestock output adversely impacted the grains mill, dairy, and animal and vegetable oils industry.

However, manufacturing growth was supported by substantial increases in basic metals, motor vehicles, non-metallic minerals, and chemical groups. Real value added of the construction sub-sector increased by 4.1 percent y/y in 2022 despite reduced development spending and the rising cost of construction in the wake of increases in borrowing and input prices.

The expansion in construction activity was led by ongoing work on building and maintaining road infrastructure, notably the Nairobi Eastern Bypass and Makupa Causeway Bridge, and sustained investment in housing helped by the government’s affordable housing program.

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