Kenya’s economy grew at a slower pace of five percent in the first three months of 2024 compared to 5.5 percent in the same period last year, in a period when the business environment was roiled by high interest rates.
A report published by the Kenya National Bureau of Statistics (KNBS) shows that all the sectors, save for finance and insurance activities, recorded slower growth in the first quarter of the year compared to the same period in 2023, pointing to a tough macroeconomic environment.
“The economy expanded by 5.0 percent in the first quarter of 2024 compared to a growth of 5.5 percent in the corresponding quarter of 2023,” said KNBS in a statement released on Wednesday.
Agriculture, which accounts for more than a fifth of the country’s gross domestic product (GDP), continued its rebound, albeit at a growing rate of 6.1 percent compared to 6.4 percent in the first quarter of 2023. Increased production of tea, milk and sugarcane during the quarter under review was eroded by a decline in exports of coffee, fruit and cut flowers.
“Similar to the first quarter of 2023, agricultural production was vibrant in the corresponding quarter of 2024, owing to favourable weather conditions that supported crop and animal production during the quarter,” said KNBS in the report.
Manufacturing, another major employer like agriculture, posted a slower growth of 1.3 percent compared to 1.7 percent.
Construction activities grew at a slower rate of 0.1 percent compared to three percent in the corresponding period. Cement consumption, a key indicator for building and construction, dipped pointing to a slowdown in public infrastructure projects.
Accommodation and electricity also recorded slower growth in the review period in which interest rates went up after the Central Bank of Kenya (CBK) was forced to revise upwards its benchmark lending rate to address the high consumer prices in the economy.
The finance and insurance sector, however, posted higher growth of seven percent in the review period compared to 5.9 percent in the first quarter of 2023, pointing to increased earnings by banks on the back of higher interest rates.
The country’s GDP—a measure of all the economic activities—expanded by 5.6 percent in 2023 from a revised 4.9 percent in 2022, buoyed by the rebound in agricultural activities.
Kenya’s economy relies heavily on farming, which means abundant rains after years of drought helped the sector to recover from contractions in the previous two years.
The economy, which is still reeling from the global supply constraints related to the Ukrainian war, has also benefited from a recovery in the hospitality sector which took a hit from the Covid-19 pandemic when travel restrictions saw a lot of hotels fire thousands of employees.
