After a prolonged period of electioneering and stagnant growth plagued by high inflation, Kenya’s economy has finally reversed its downward trend after reporting seven consecutive quarters of growth decline.
The rebound can be attributed to several factors, with the Kenya National Bureau of Statistics citing “sufficient rainfall” as a primary driver.
This increased rainfall resulted in a 5.8 percent growth in farming activities, marking the first positive growth since the final quarter of 2020.
In its GDP report for the first quarter, the KNBS stated, “The growth was largely supported by a rebound in agricultural activities, which grew by 5.8 percent owing to sufficient rainfall experienced during the quarter under review.”
The favorable weather conditions led to enhanced production, particularly in food crops. This boost was evident in the significant increase in vegetable and fruit exports during the period.
The official figures for the first quarter demonstrate the economy’s fastest growth in the last four quarters, defying the challenges posed by the high cost of living caused by a prolonged drought.
This quarter represents a turning point, putting an end to seven consecutive declines from a peak of 10.3 percent in 2021 to 3.7 percent in December.
These signs of recovery indicate a positive trajectory post-pandemic, despite global supply disruptions.
According to the KNBS, Kenya’s gross domestic product expanded by 5.3 percent in the first quarter of the year, surpassing the 3.7 percent growth of the previous period ending in December 2022.
The growth rate also exceeded the rates recorded in the quarter ended September (4.3 percent) and the second quarter of the previous year (5.2 percent), during which the country faced challenges posed by severe drought and global supply disruptions related to the Russian invasion of Ukraine.
However, it is important to note that inflation remained a concern, with a 9.13 percent average in the January-March period compared to 5.34 percent in the corresponding period in 2022.
This was mainly driven by spikes in food and energy prices, compounded by a weakening shilling, which experienced an 11.1 percent depreciation against the US dollar, the reserve currency in international trade.
The manufacturing sector especially has been negatively impacted by the elevated inflation and the depreciation of the shilling, primarily due to its reliance on foreign markets for supplies.
As a result, the sector experienced a slowdown, with growth slowing down from 3.8 percent in the first quarter of 2022 to 2.0 percent.
However, there were some positive contributions from the production of bakery products such as bread and the processing and preservation of fish.
In the transportation and storage sector, growth also decelerated from 7.7 percent in the previous year to 6.2 percent.
Despite the challenges posed by high fuel costs, railway services helped to mitigate the impact, although road transport fares were negatively affected.
The construction sector, which heavily relies on public investment in infrastructure projects, also experienced a significant decline in growth, dropping from 6.0 percent to 3.1 percent. This decrease can be attributed to reduced cement consumption.
Other sectors that witnessed a slowdown include financial and insurance services, with growth decreasing from 17.0 percent to 5.8 percent.
This was influenced by the rising cost of borrowing. Similarly, the information and communication technology (ICT) sector saw a slight dip in growth from 9.0 percent to 8.7 percent.
These various sectors have experienced a deceleration in expansion due to a range of factors, including inflation, increased costs of borrowing, and reduced cement consumption.
