Kenya to miss full year growth target of 5.8 per cent

What you need to know:

Data released by the Kenya National Bureau of Statistics Monday night showed that growth in the labour intensive agriculture was 2.7 per cent, down from 6.8 per cent last year.
Although hotels and restaurants improved from last year’s contraction of 12.8 per cent, the fragile sector’s growth was negative three per cent.
Manufacturing sector recorded a higher overall growth of five per cent during the period to March compared to 2.5 per cent last year.

Bad weather and insecurity pulled down overall growth to 4.1 per cent in the first quarter of 2014 from 5.2 per cent over the corresponding period last year, with agriculture, communications and finance recording the sharpest slow down.

Data released by the Kenya National Bureau of Statistics Monday night showed that growth in the labour intensive agriculture was 2.7 per cent, down from 6.8 per cent last year.

“A major factor that constrained economic growth during the quarter was the erratic weather pattern that resulted in depressed agricultural output,” KNBS said.

Although hotels and restaurants improved from last year’s contraction of 12.8 per cent, the fragile sector’s growth was negative three per cent.

“The deceleration in growth of the hotel industry was largely due to insecurity concerns coupled with negative travel advisories by some key tourist source countries,” the KNBS states.

Transport, trade, manufacturing, wholesale and retail trade, mining and electricity showed positive growth trends. Manufacturing sector recorded a higher overall growth of five per cent during the period to March compared to 2.5 per cent last year.

Transport and communication sector expanded by six per cent compared to a growth of 5.6 per cent in 2013 while electricity and water production grew by 4.4 per cent compared against a contraction of 0.8 per cent in 2013.

“There was a substantial decrease in hydro generation of electricity which was matched by a significant increase in thermal generation and, therefore, impacted negatively on the growth of the sector. However, generation of geothermal power expanded rapidly and, therefore, more than compensated for the decline in hydro generation,” the report states.

Suppressed external demand during the review period saw export of vegetables contract by 20.3 per cent in 2014 to 16,600 tonnes while that of fruits increased by 18.5 per cent to reach 9,200 tonnes over the same period.

Quantities of cut flower exported declined marginally over the review period.

Tea production decreased by 4.4 per cent compared with a growth of 61.8 per cent in a similar quarter in 2013. Coffee and sugarcane output recorded significant growths while international auction prices of coffee and tea decreased compared to the same quarter in 2013.

READ: World Bank revises Kenya economic growth forecast over insecurity

During the period to March, Finance recorded a slowed growth of 8.3 per cent from 12.1 per cent. Construction was not spared with a growth of 4.9 per cent down from 7.4 per cent in the first quarter of March 2013.

“The growth in the construction sector was reflected in cement consumption which expanded by 17.2 per cent during the review period,” the KNBS states.

The general drop in Quarter One performance mirrors the forecast released by World Bank last week which predicts slower than expected growth for 2014.

The World Bank projects that Kenya’s economy would expand by 4.7 per cent by end of December, 0.5 percentage points below its previous estimate six months ago.

“The projections reflect the effects of the drought, the deteriorating security situation, and low level of budget execution,” the bank said in its June Economic Update for Kenya.

The cuts suggest growth in Kenya will lag behind its East African neighbours. The government earlier this month put Kenya’s growth at 5.8 per cent this year and 6.4 per cent in 2015.