Economy grew by 6.8 per cent between January-March amidst high cost of living

 Jackson Omondi, a trader at Eldoret's main market, reveals that they have increased the prices of their commodities. [Peter Ochieng, Standard]

The economy grew by 6.8 per cent in the first three months of the year, the highest in 22 years, new data from the Kenya National Bureau of Statistics (KNBS) has shown.

The expansion of gross domestic product (GDP), or the total value of all goods and services, compared to the same period last year has been attributed to increased economic activities after the country rolled back the containment measures aimed at curbing the spread of the Covid-19 pandemic.

“The performance was supported by rebounds in most economic activities that had contracted significantly in the first quarter of 2021 due to measures instituted to curb the spread of COVID-19,” said KNBS in its Quarterly Gross Domestic Product Report for the first quarter of 2022.

This is fastest first quarter growth since 2010 when GDP expanded by 7.3 per cent in the period between January and March.

The report shows that Kenyans produced goods and services valued at Sh3.3 trillion in the first three months compared to Sh2.96 trillion in the same period last year.

However, the rate of growth is not as fast as in the second and third quarters of 2021.

This is partly because this growth is coming from a slightly higher base compared to one of the second and third quarters of 2021 which were being compared to a period when the size of the economy shrunk.

Moreover, the agricultural sector, for long seen as the country’s economic backbone, has continued to underperform.

And with just a month after the start of the Russia-Ukraine conflict which has disrupted the global supply chains and pushed the prices of critical raw materials such as fuel, fertilizer, palm oil (used for manufacturing cooking oil), and wheat, the report does not capture fully the impact of this war.

However, due to the lingering effects of Covid-19 and the initial adverse effects of the Russia-Ukraine conflict, another report by KNBS shows that the quantity of quantity of imported wheat and rice declined by 35.4 per cent and 32.3 per cent, to 384.8 thousand tonnes and 132.6 thousand tonnes, respectively in the first quarter of 2022.

Crop growing and livestock rearing activities continue to contract, registering a negative growth of 0.7 per cent in the review period compared to a contraction of 0.4 per cent in second quarter last year.

“The contraction was mainly attributed to depressed rainfall during the fourth quarter of 2021 as well as delayed onset of rains during the quarter under review, thereby leading to reduced agricultural production,” reads part of the report released yesterday by KNBS.

Indeed, during the period, imported maize more than tripled from 37,100 tonnes in the first quarter of 2021 to 116,200 tonnes in the period under review.

Exports of horticulture—including flowers, fruits and vegetables- and tea production declined during the period under review.

The export of vegetables and fruits, which rely largely on rains, as well as production of tea, declined in the period under review, denying the country critical foreign exchange (FX) currencies in a period when the country has been grappling with dollar shortage.

Tea production, a critical FX earner, reduced 141,000 tonnes in the first quarter of 2021 to 135,800 tonnes in the first quarter of 2022.

Things would have been worse if it was not for improved production of sugarcane, milk and coffee.

The manufacturing sector, another real sector that offers decent jobs, posted an improved growth in what was attributed to the food sector, especially processing of coffee.

However, due to the poor tea production, processing of tea underperformed in the period under review.

The non-food sector in the manufacturing sector was boosted by a 30.1 per cent jump in cement production.

Generally, the service sector—transport, ICT, finance and insurance, wholesale and retail, building and construction, tourism, and real estate—posted better performance.  

The relaxation of the Covid-19 measures saw accommodation and food service activities sector expanded by 56.2 per cent in the first quarter of 2022 from a contraction of 33 per cent in the same quarter of 2021. The sector continued with its upward

“The accelerated growth was evidenced by the significant increase in the number of visitors’ arrivals through Jomo Kenyatta International Airport and Mombasa International Airport by 85.1 per cent from 121,739 in the first quarter of 2021 to 225,321 visitors in the first quarter of 2022.”

The economy has since then been strained by a high cost of living, with prices of goods and services increasing at 7.9 per cent in June, the highest since August 2017.