Kenya’s economy grew at a slower pace of 5% in the first three months of 2024 compared to 5.5% in the same period last year, in a period of turbulent business environment and high interest rates.
A report released by the Kenya National Bureau of Statistics showed that all sectors, except financial and insurance activities, recorded slower growth in the first quarter of the year compared to the same period in 2023, indicating a challenging macroeconomic environment.
“The economy expanded by 5.0 percent in the first quarter of 2024 compared to a growth of 5.5 percent in the corresponding quarter of 2023,” the National Statistics Agency said in a statement on Wednesday.
Agriculture, which accounts for more than a fifth of the country’s GDP, continued to recover, albeit at a growth rate of 6.1 percent compared to 6.4 percent in the first quarter of 2023. The increase in tea, milk and sugarcane production during the quarter under review was eroded by lower exports of coffee, fruits and cut flowers.
“Similar to the first quarter of 2023, agricultural production was vibrant in the corresponding quarter of 2024, due to favourable weather conditions that supported crop and livestock production during the quarter,” the National Statistics Office said in the report.
The manufacturing sector, another major employer like agriculture, grew at a slower pace of 1.3% compared to 1.7%.
Construction activity grew 0.1% slower than the 3% growth in the previous period. Cement consumption, a key indicator of building and construction, fell, indicating a slowdown in public infrastructure projects.
The accommodation and electricity sector also recorded a slowdown in growth during the review period as interest rates rose after the Central Bank of Kenya was forced to revise the benchmark lending rate upwards to address rising consumer prices in the economy.
However, the finance and insurance sector recorded a higher growth of 7% in the reporting period compared to about 5.9% in the first quarter of 2023, indicating an increase in banks’ profits on the back of higher interest rates.
The country’s gross domestic product – a measure of all economic activity – is expected to grow by 5.6% in 2023 from 4.9% in 2022, supported by a recovery in agricultural activities.
Kenya’s economy is heavily dependent on agriculture, meaning that abundant rains after years of drought have helped the sector recover from contractions in the previous two years.
The economy, which is still suffering from global supply constraints linked to the Ukraine war, has also benefited from a recovery in the hospitality sector, which was hit by the Covid-19 pandemic when travel restrictions caused many hotels to lay off thousands of employees.