Kenya’s gross domestic savings as a percentage of GDP fell to 10.3 per cent last year from 11.2 per cent in 2016 as the rising cost of living ate into cash set aside for a rainy day.
Latest statistics by the Treasury show that total domestic savings fell to Sh795.1 billion from Sh807 billion in 2016, even with the GDP growing by 4.9 per cent at the same time to Sh7.75 trillion.
These savings are usually a barometer of the financial well-being of the population, with times of prosperity characterised by higher savings and leaner times seeing people raid their accounts for cash.
“The high cost of living is mainly why you hardly see attractive savings rate in Kenya rather than what many conventionally tend to blame, the interest rate levels.
In contrast, in more developed markets with lower cost of living, poor spending habits are largely responsible for the deficiency in saving levels,” said Stanbic regional economist Jibran Qureishi.
Last year was economically tough for Kenyans, as inflation rose to an average eight per cent compared to 6.3 per cent in 2016 due to high cost of food as drought ravaged the country.
There was also post-election disruption that meant Kenyans were often forced to dig into their savings while not generating income.
Earnings were also hit by thousands of job losses in the private sector, which forced victims to dip into savings to make ends meet.