Relaxed Covid rules fail to lift economy

Kenya’s economy remained in doldrums in the third quarter of 2020 despite progressive easing of lockdowns imposed to curb the spread of Covid-19, new data shows.

The Kenya National Bureau of Statistics(KNBS) said the country’s GDP contracted 1.1 per cent in the July-September 2020 period compared to a similar period a year earlier — marginally defying earlier predictions that the economy had to reached a lowest point in the second quarter and was set to begin rising.

The slump was, however, softer compared with the second quarter’s 5.5 per cent plummet, aided largely by stronger performance in agricultural production and construction works.

A section of economists had earlier projected the deep contraction at the height of Covid-19 restrictions in the April-June 2020 period had eased off after curfew hours were shortened and exports rebounded, boosting private sector output.

“The contraction was much lower than that recorded during the previous quarter largely against a backdrop of partial easing of Covid-19 containment measures that facilitated gradual resumption of a number of economic activities,” KNBS said in the third quarter GDP report.

“Strong growths in information and communication, financial and insurance, and real estate also supported growth from a deeper contraction.”

President Uhuru Kenyatta eased some of the shutdown measures in the third quarter, including lifting of inter-county travel restrictions and allowing resumption of domestic and international commercial passenger flights to stimulate demand.

Relatively strong performance in farming, construction works, real estate projects as well as ICT and financial services failed to outdo the battering inflicted on activities in accommodation and food services as well as manufacturing in the period.

However, the Central Bank of Kenya governor Patrick Njoroge once again questioned the numbers which were reported to the KNBS from some sectors, singling out manufacturing and hospitality sectors.

KNBS data showed manufacturing activity slumped 3.2 percent in the review period from a growth of 3.9 percent a year earlier largely on reduced production of meat and meat products, liquid milk, wheat flour, beverages and grain mill (unga) products.

Manufacture of edible fats and oils, cigarettes, cement, galvanized iron sheets, assembly of motor vehicles and thinners, however, grew during the quarter.

Dr Njoroge, however, argued that some of the numbers in the manufacturing sector were not aligned to leading economic indicators such as “strong credit” advanced to the sector, reported turnovers, a pick-up in importation of intermediate goods and consumption trends during the review quarter.

“Here is a case where we need to see where the problem is in reporting because it’s clear to us that the problem is on the reporting side. That’s something we (CBK) and the Kenya National Bureau of Statistics need to look at a little more,” the CBK boss said on Thursday.

“But it’s clear that numbers that were down include things like soda production and beer. But those do not comprise manufacturing a 100 percent. As a matter of fact, there has been new lines of production, in particular PPEs (personal protection equipment) and the rest.”

Despite lifting of a ban on international flights in August, accommodation and food services sector contracted 57.9 percent from a 9.9 percent growth a year earlier, although the slump was softer than 83.3 percent in second quarter.

“The number of visitor arrivals through the two major international airports declined from 453,881passengers in the third quarter of 2019 to 34,701 passengers in the review period,” KNBS analysts wrote in the report

The dominant agriculture sector, which accounts for more than a third of growth, nonetheless, remained resilient, growing 6.3 percent in second quarter of 2020 compared with 5.0 percent in the corresponding period a year earlier.

Performance in agricultural production as a result of favourable weather conditions was supported by a 13.7 percent growth in tea production to 118,500 metric tonnes, while cane deliveries and fruit exports rose 91.9 percent and 31.6 percent, respectively, to 1,900,000 tonnes and 25,000 tonnes.

Activity in construction sector expanded 16.2 percent compared with 6.6 percent in the same period last year, while growth in financial and insurance services as well as transportation and storage slowed to 5.3 percent from 8.1 percent and 2.9 percent and 7.6 percent, respectively.