Kenya’s economy slows down to 4.3 per cent in second quarter

Visitors at Jomo Kenyatta International Airport. Drop in tourist arrivals blamed for low growth of economy. [PHOTO: MARTIN MUKANGU/STANDARD]

By MACHARIA KAMAU

The level of economic activities in the country shrank during the second quarter of this year owing partly to a sharp decline in the number of tourist arrivals.

Also contributing to the drop were slowed growth in wholesale and retail trade and reduced spending by the government.

Latest data from the Kenya National Bureau of Statistics (KNBS) shows the economy expanded by 4.3 per cent during the period from April to June compared to 4.4 per cent in a similar period last year.

The statistics body shows that while other economic sectors registered positive growth during the three-month period to June hotel and restaurants contracted by 11.4 per cent compared to 2.9 per cent growth in a similar period last year.

“The sector’s economic slow down experienced in the first quarter of 2013 spilled over into the second quarter mainly through low booking by international visitors due uncertainties over the country’s general elections held in March this year,” says KNBS.

According to KNBS the country’s overall balance of payments position deteriorated to a surplus of Sh47.86 billion from a surplus of Sh50.05 billion while the current account deficit worsened by 50.6 per cent to Sh95.35 billion from Sh63.3 billion in a similar period.

A services account surplus also decreased by 53.2 per cent to Sh50.16 billion from Sh107.23 billion.

During this period the Government  put a lid on its spending progranmmes and suspended all major contracts and payments in excess of Sh500,000 by the Ministries and Parastatals pending the formation of the new Jubilee government.

Strong expansion

Economic growth in the second quarter was mainly supported by strong expansions of activities of Electricity and Water, Financial intermediation, Agriculture and Forestry and Manufacturing sectors.

The economy expanded by 5.2 per cent in the first quarter (January-March) compared to 3.9 per cent in a similar period last year.

The review by the statistics body comes at a time when government technocrats and economists from various international institutions appear to be reading from different scripts on the country’s economic outlook. The Ministry of Devolution and Planning projects Kenya’s economy to grow by 6 per cent in 2013 up from 4.6 per cent last year driven by growth in sectors such as agriculture.

Optimism around the economy has risen after the country held a peaceful presidential poll in March this year.  The   World Bank forecasts a growth rate of 5.7 per cent in 2013 supported by high investment and low interest rates.

The Bank further warns that the economy is still operating below its potential and remains vulnerable to external shocks.

According to the Bank’s Economic Update report for Kenya the   growth forecast of 5.7 per cent is pegged on a stable macroeconomic environment, peaceful elections in March, and smooth transition of political power.

The Bank expects Gross Domestic Product (GDP) to improve further to 6 per cent in 2014.  African Development Bank, on the other hand, expects real GDP to increase to 4.5 per cent in 2013 and 5.2 per cent in 2014 depending on political and macroeconomic stability.