Service sector maintains GDP contribution growth, builds edge
Economists argue that a shift from the primary and secondary sectors growing services industry is a pointer of an economically maturing nation and an indicator of faster economic progress of a country.
The contribution of service sectors to the Kenyan economy grew by 0.76 percentage points to 62.72 percent in the quarter to September 2024, retaining a trend of increment even as traditional top contributors like agriculture and construction industries posted a general drop.
Service industries, led by transport, real estate and financial and insurance sectors, contributed a total of Sh1.65 trillion to the Kenyan Gross Domestic Product (GDP) in the quarter to September 2024, an Sh83 billion increment from the Sh1.57trillion recorded a year earlier.
GDP is a measure of the total value of goods and services produced in the economy over a particular period. It is an indicator of how well an economy is performing and informs on the economic health of a country.
Data from the Kenya National Bureau of Statistics (KNBS) further indicates that primary and secondary sectors such as agriculture, mining, and construction, which have traditionally contributed the most to the economy, are losing their edge to services.
Jointly, agriculture and mining contributed Sh405 billion to the economy over the period, which, although higher than the Sh393 billion recorded a year earlier, represents a smaller share of the total GDP of 15.41 percent.
Manufacturing, utilities, and construction sectors saw a 3.3 percent decline in their share of GDP, from 16.91 percent in September 2023 to 16.35 last year, with the building industries recording the sharpest contraction.
According to KNBS, the slowdown in the three sectors is accompanied by a corresponding drop in production by major companies in the sector, as seen with cement, galvanised sheets, motor vehicles and electricity generation, among others.
Growth in the construction industry has now been negative for the second quarter in a row, while mining has shrunk for the third consecutive quarter, and agriculture and construction industries have recorded slower progress.
KNBS data shows the construction sector shrunk by 2 percent in the quarter to September, extending a poor run from the three months to June 2024 when it contracted by 2.9 percent.
The rise in the services industry contribution was mostly buoyed by increments in the shares contributed by real estate, professional services, transport, and hospitality industries, which jointly claimed additional 0.51 percent of the country’s economic output.
Economists argue that a shift from the primary and secondary sectors growing services industry is a pointer of an economically maturing nation and an indicator of faster economic progress of a country.
“Services provide an important enabling role in growth and job creation in other sectors, by providing inputs: they provide the logistics to trade goods, including getting agricultural goods to market, they facilitate technologies used in the production process, and they provide the financing for much-needed investments,” said the World Bank in a recent publication on Kenya’s economic progress.
