Kenya’s economy in 2023 grew at the second fastest rate in five years largely on the back of a rebound in agricultural output and continued recovery in tourist receipts, boosting job opportunities.
The country’s gross domestic product (GDP) — a measure of all economic activities — expanded 5.6 percent from a revised 4.9 percent in 2022, the Kenya National Bureau of Statistics announced on Monday.
The growth that was the second-highest since 2018, was outpaced by 2021 when activities expanded 7.6 percent largely on the low-base effects of the pandemic year when the economy contracted 0.3 percent.
The rebound was in line with estimates by the Central Bank of Kenya (CBK) and African Development Bank (5.6 percent), but slightly slower than the 5.4 percent predicted by the World Bank Group.
A steady growth in GDP means people are earning and spending more money resulting in increased tax receipts that the government should ideally spend on improving public services such as education, healthcare and security.
The GDP has, however, been criticised for not showing how income is spread across various working groups, hence the measure could sometimes be a result of the rich getting richer and the poor getting poorer.
The GDP growth was posted in an environment of elevated inflation that averaged 7.7 percent, unchanged from 2022, prompting the CBK to raise benchmark interest rates from 8.75 percent in December 2022 to 12.50 percent in December last year.
That prompted commercial banks to increase average interest rates on loans from 12.67 percent in December 2022 to 14.63 percent in December 2023.
A double-digit weakening of the shilling against the major trading currencies also raised the cost of imports. The Kenyan currency, for instance, depreciated 18.65 percent against the US dollar to exchange at an average of 139.85 units in December 2023 compared with 117.87 units a year earlier, the KNBS says, quoting the CBK data.
“During the period under review, most of the macroeconomic indicators displayed an upward trend,” the KNBS says in the Economic Survey 2024.
Kenya’s economic activities were by a large part lifted by increased crop and livestock production which grew 6.5 percent compared with a contraction of 1.5 percent in 2022, helped by improved rainfall.
Agricultural output, the country’s mainstay economic activity accounting for about a fifth of GDP, was mainly boosted by “significant” growth in the production of key food crops such as maize, beans, and potatoes as well as cash crops such as tea. Output of coffee and sugarcane, however, dropped.
The KNBS attributed the rebound in farming activities to “favourable weather conditions, expansion in area under crop as a result of farmers anticipating high prices for their produce; and enhanced government interventions that included the fertiliser subsidy programme”.
The activities were further supported by improved earnings from the tourism sector where international visitor arrivals jumped 35.4 percent to nearly 2.09 million, surpassing the pre-Covid levels in 2019.
“The improved performance was mainly attributed to growth in the aviation sector and the hosting of prominent conferences in the country,” the KNBS wrote in the Survey. “The number of international conferences held expanded by 9.0 percent to 977 in 2023 compared to 896 in 2022. This was boosted by high-profile international conferences and meetings held in the country during the review period.”
Other sectors which grew faster in 2023 than 2022 include transport and storage where activities expanded 6.2 percent compared with 5.8 percent, ICT (9.3 percent from 9.0 percent), while real estate grew 7.3 percent from 4.5 percent the year before.
Elevated inflation amid depreciating shilling hurt output in manufacturing sector which significantly relies on foreign markets for supplies. Growth in the sector slowed to 2.0 percent from 2.6 percent the year before, supported largely by the agro-processing of animal feeds, dairy, preserved fruits and vegetables as well as meat.
Growth in the construction sector decelerated to 3.0 from 4.1 percent, financial services (10.1 percent from 12 percent), wholesale and retail trade (2.7 from 3.5 percent), education (3.1 from 5.2 percent) and electricity supply (2.9 from 5.7 percent).
