Kenya’s real Gross Domestic Product (GDP) in the second quarter of 2017 slowed down to 5.0 percent compared to 6.3 per cent in the corresponding quarter of 2016.
According to the country’s stats office (KNBS), the quarter in review was characterized by sharp increases in food prices as a result of adverse weather conditions and a notable rise in international oil prices. This led to a surge in inflationary pressures with the average inflation rate increasing by 540 basis points (bps) from 5.36 percent in the second quarter of 2016 to 10.80 per cent in the review quarter.
“The slowed but robust growth was supported by activities of Transport and Storage, Real Estate, Information and Communication Technology, Accommodation and Food services and a slightly improved growth in Wholesale and Retail Trade. On the other hand, the growth was somewhat constrained by subdued performances in Agriculture Forestry and Fishing (1.4 per cent), Manufacturing (2.3 per cent), Electricity (6.1 per cent) and Financial intermediation (4.3 per cent) thereby dampened the overall growth momentum during the quarter in review.” said KNBS in a statement.
Performance of the agriculture sector was exacerbated by widespread drought experienced during the fourth quarter of 2016 and somewhat suppressed long rains in 2017 that considerably affected crop production and rearing of animals. This led to a notable slowdown in the manufacture of food as agro-processing was negatively affected by constrained supply of food products. Electricity generation was also greatly affected by reduced rains thereby necessitating increased use of thermal sources whose intermediate inputs are more expensive compared to other sources. Growth in Financial Intermediation was also dampened by the effect of continued slow uptake of credit.
The current account deficit widened to KSh 134.8 billion in the quarter under review from a deficit of KSh 114.1 billion in the corresponding quarter of 2016 on account of significant increase in the value of imports.
Total exports to the EAC recorded a 14.4 per cent decrease in the second quarter of 2017 to KSh 25.7 billion from 30.0 billion in the second quarter of 2016. A similar trend was observed in total exports to COMESA which declined from KSh 42.9 billion in the second quarter of 2016 to KSh 39.5 billion in the second quarter of 2017. On the regional front, imports from the EAC nearly doubled from KSh 7.3 billion in the second quarter of 2016 to KSh13.1 billion in the quarter under review, while imports from COMESA increased to KSh 26.6 billion in the same period.
During the quarter, the Kenyan Shilling marginally depreciated against the US dollar but appreciated slightly against the sterling pound.
Commercial bank lending rates dropped from an average of 18.15 per cent in the second quarter of 2016 to 13.63 per cent in the quarter under review.