In 2017, Kenya’s economy kicked off with fears of a decline due to heated political temperatures pegged on the elections slated for August that year. The GDP growth in 2017 was initially projected to grow at 5.9% but later reduced to 5.5% which again was cut to 5.0%, amid speculations that the growth will worsen due to the highly charged and divided forthcoming elections. This growth was however to be sustained by continued low international oil prices, continued stability of the Kenya shilling (KES), improved security as a boost to tourism and continued reforms in governance and justice. The National Treasury later announced a drop in revenue collections for the first four months of the 2017/18 (July-June) fiscal year that had fallen short by Ksh 40 billion.
According to the Kenya National Bureau of Statistics (KNBS)’s 2017 quarterly reports:
In the first quarter, the economy rose by 4.7% compared to 5.9% in the same quarter of 2016. This decline was attributed to sluggish growth of Agriculture, Financial Intermediation and Electricity supply. Drought also played a major role in this decline due to the short rains experienced in the period under review. Finance and Insurance sectors portrayed a staggering growth due to commercial banks reducing lending to the private sector. Sectors that recorded improvement include; Accommodation, Food services, Wholesale and Retail trade, Real estate, Transport and Storage, and Information and Communication. There was a 62.2% increase in the international oil prices in the period under review as compared to the same quarter in 2016. Inflation averaged at 8.8% overshooting the Central Bank’s upper limit of 7.5%. However there was a moderate buildup in inflationary pressures as a result of significant increases in prices of food and beverages during the period under review. Interest rates reduced significantly as a result of the capping effected in September 2016. The Kenyan Shilling strengthened against most trading currencies, with a notable gain of 12.1% against the Pound Sterling. However, the Shilling weakened against the South African Rand, Yen and US Dollar in the same quarter.
In the second quarter, the economy grew by 5.0% compared to 6.3% in 2016 for the same period. This growth was characterized by subdued performances in the following sectors; Agriculture at 1.4% attributed to widespread drought experienced during the fourth quarter of 2016. Electricity supply at 6.1% due to the short rains, Financial Intermediation at 4.3% as a result of slow uptake of credit. Manufacturing sector also recorded a dampened growth at 2.3%. This quarter recorded drastic increases in food prices as a result of adverse weather conditions and notable rise in the international oil prices. Thereby inflation increasing from 5.36% in 2016 up to 10.80% for the period under review. As a result of significant increase in the value of imports, the current account deficit widened to KSh 134.8 billion from a deficit of KSh 114.1 billion in same quarter of 2016. However, some sectors recorded growth including; Transport and Storage, Real Estate, Information and Communication Technology, Accommodation, Food, Wholesale and Retail Trade. The Kenyan Shilling weakened against the US dollar, South African Rand and Tanzanian Shilling but strengthened against the sterling pound and Ugandan Shilling, with a stagnant change against the Euro and the Japanese Yen. Lending rates by commercial banks dropped to 13.63% up from 18.15% in 2016 under the same quarter.
In the third quarter, the economy expanded by 4.4% compared to 5.6% in 2016 in the same period. This dampened growth was largely pegged on the uncertainties in the political environment and adverse weather conditions. The economy was further buffeted by political risks after the Supreme Court nullified President Uhuru Kenyatta’s win in the August 8 election and ordered a re-run that was boycotted by the opposition led by its leader The Right Honourable Raila Odinga. This quarter recorded the slowest growth since the fourth quarter of 2013, as most sectors recorded a sluggish growth. Financial and Insurance activities posted the largest drop, decelerating to 2.4% up from 7.1% in 2016 for the period under review. Other sectors that recorded decline in growth include; Manufacturing, Health, Accommodation and Food services; Mining and quarrying, and Education. However, some sectors recorded improvements; Professional, Administration and Support services; Public administration and Real estate activities. Inflation hiked to 7.5% as compared to 6.3% in the same quarter of 2016, a rise attributed to a surge in prices of food and non-alcoholic beverages. As a result of faster growth in imports compared to that of exports leading to deterioration in merchandise trade deficit, the current account deficit worsened by 28.9% to KSh 145.4 billion from a deficit of KSh 112.8 billion in same quarter of 2016. Murban Adnoc crude oil prices increased by 10.2% to $51.05/Barrel down from USD $46.32/Barrel in the same quarter of 2016. With the Central Bank Rate (CBR) maintaining at 10.0% throughout the quarter, interest rates on commercial banks loans decelerated to 13.67% as compared to 16.54 % for the same quarter of 2016, this was as a result of the capping of interest rates that started in September 2016. The Kenyan Shilling strengthened against the Pound Sterling, Japanese Yen, Ugandan Shilling, Tanzanian Shilling but weakened against the US Dollar, the Euro and South Africa Rand.
2018 ushered in with high hopes that Kenya’s economy will rebound after drought and political turmoil during a prolonged election cycle. Projections have placed the GDP growth at 6.5%. The government plans to issue another Eurobond, to be used to repay an outstanding amount of a $750 million syndicated loan that the government raised in 2015 from a group of 26 banks paying at a margin of 520 basis points over LIBOR, that matured in October 2017, this is after issuing a $2 billion dollar-denominated Eurobond in 2014. With 90% of investors in that loan agreeing to extend the maturity by six months until April 2018, with the option of refinancing it by a Eurobond. Kenya still remain a regional hub for trade, diplomacy and security in Eastern and Central Africa, but with fears that the country is losing its grip over the dominance it has controlled in the past.
Kenya’s Economic Data
|GDP per capita (USD)||1,243||1,322||1,433||1,427||1,558|
|GDP (USD bn)||50.6||55.3||61.6||63.1||70.8|
|Economic Growth (GDP, annual variation in %)||4.5||5.9||5.4||5.7||5.8|
|Consumption (annual variation in %)||5.7||8.5||4.6||5.1||4.8|
|Investment (annual variation in %)||12.7||1.2||14.8||6.7||-9.3|
|Industrial Production (annual variation in %)||4.1||5.4||5.3||6.1||6.0|
|Fiscal Balance (% of GDP)||-6.0||-6.8||-7.0||-9.6||-8.1|
|Public Debt (% of GDP)||42.1||44.5||45.9||50.4||53.5|
|Money (annual variation in %)||17.2||13.8||18.6||12.8||4.8|
|Inflation Rate (CPI, annual variation in %, eop)||3.2||7.2||6.0||8.0||6.4|
|Inflation Rate (CPI, annual variation in %)||9.4||5.7||6.9||6.6||6.3|
|Policy Interest Rate (%)||11.00||8.50||8.50||11.50||10.00|
|Exchange Rate (vs USD)||86.00||86.45||90.55||102.3||102.5|
|Exchange Rate (vs USD, aop)||84.53||86.13||87.95||98.27||101.5|
|Current Account (% of GDP)||-8.4||-8.1||-9.8||-6.8||-5.2|
|Current Account Balance (USD bn)||-4.3||-4.5||-6.0||-4.3||-3.7|
|Trade Balance (USD billion)||-10.2||-10.5||-12.4||-10.1||-7.9|
|Exports (USD billion)||6.1||5.9||6.1||5.9||5.7|
|Imports (USD billion)||16.3||16.4||18.5||15.9||13.6|
|Exports (annual variation in %)||7.0||-3.6||2.7||-3.4||-2.4|
|Imports (annual variation in %)||11.0||0.4||12.6||-13.8||-14.4|
|International Reserves (USD)||5.7||6.6||7.9||7.5||7.6|
|External Debt (% of GDP)||23.5||24.8||27.1||30.4||–|