Kenya’s economy grew by 5.4 per cent in the second quarter of 2023, marking the second successive quarterly growth underpinned by strong showings, particularly in the financial, hospitality and agriculture sectors.
The increase in economic output is the strongest since the 6.2 per cent growth in the first quarter of 2022, according to data released by the Kenya National Bureau of Statistics (KNBS).
The second quarter growth is 10 basis points higher than the 5.3 per cent output increase in the first quarter and 20 basis points higher than the second quarter of last year.
“The quarterly gross domestic product (GDP) report shows the overall and sectoral performance of the economy. From the start, the economy is estimated to have grown by 5.4 per cent during the second quarter of 2023 compared to 5.2 per cent in the same quarter of 2022,” said KNBS.
Kenya’s economy has been under stress from high inflation amid a spike in the cost of basic commodities especially food, fuel and electricity even as the Kenyan shilling continues to slide against the US dollar, making imports more expensive.
Amid the economic strife, banks have continued to pull impressive results, with the financial and insurance sector growing at the sharpest pace of 13.5 per cent during the quarter.
This is more than double the 5.8 per cent growth the sector recorded in the previous quarter but lower than the 16 per cent pace it grew in the second quarter of 2022.
“The cost of credit issued by commercial banks went up during the second quarter of 2023, with average interest rates on loans and other advances increasing to 13.31 per cent in June 2023, up from 12.27 per cent in June 2022,” said KNBS.
The full reopening of the economy from Covid-19 pandemic restrictions has revitalised the hospitality industry amid an increasing stream of visitor arrivals in the country, pushing the sector to grow by 12.2 per cent, the second-highest growth.
This growth is, however, a sharp drop from the impressive output increase of 21.5 per cent that the sector posted in the first quarter.
Agriculture, which is the bedrock of Kenya’s economy, posted a growth of 7.7 per cent marking the second successive quarterly growth after growing by 6 per cent in the previous quarter.
The sector has been struggling under the weight of a biting drought for much of the last two years leading to negative growth in both 2021 and 2022 as crop production plummeted.
“The performance was primarily on account of favourable weather conditions, which resulted in increased agricultural production in the second quarter of 2023 compared to the corresponding quarter of 2022. This growth was particularly evident in production of tea, coffee, vegetables, fruits and milk,” said KNBS.
During the period, however, manufacturing activities suffered heavily from reduced consumption due to a high cost of living amid a sharp rise in the cost of inputs such as fuel, sugar, equipment and electricity.
The sector’s growth slowed down to 1.5 per cent from 2 per cent last year which is the lowest growth witnessed since the second quarter of 2020 when it shrunk by 2 per cent under the weight of the pandemic.
This as inflation rose from an average of 7.15 per cent in the second quarter of 2022 to 7.94 per cent in the second quarter of 2023, driven by higher food and energy prices.
“In the manufacture of food products, production of sugar and soft drinks declined by 51.6 per cent and 10.7 per cent to stand at 97,800 metric tonnes and 121.3 million litres, respectively in the second quarter of 2023,” it said.
The energy regulator in April raised electricity prices by as much as 63 per cent and the effect has been felt immediately in the performance of the electricity and water supply sector whose growth slowed down to just 0.8 per cent.
It is the lowest growth the sector has recorded since the first quarter of 2020 when it shrunk by 4.5 per cent. The construction sector grew by 2.6 per cent down from 3.1 per cent, wholesale and retail decelerated to 4.2 per cent from 5.7 per cent while transport and storage slowed down to 3 per cent from 6.2 per cent.
Further, information and communication grew by 6.4 per cent which is lower than9 per cent in the previous quarter, public administration slowed down to 3.8 per cent while health grew by 5 per cent down from 5.4 per cent in the first quarter.
The National Treasury has tipped Kenya’s economy to grow by 5.5 per cent in 2023 and above 6 per cent over the medium term which it says will be underpinned by the Kenya Kwanza government’s Bottom-Up agenda.
