During the third quarter of 2017, merchandise trade deficit widened by 32.5 per cent to KSh 289.7 billion from KSh 218.7 billion in the third quarter of 2016 as summarised in Table 1. This was mainly on account of increased imports valued on free on board basis that was driven by growth in the import bill of food and petroleum products in the third quarter of 2017. International trade in services balance grew by 22.5 per cent from a surplus of KSh 36.5 billion in the third quarter of 2016 to a surplus of KSh 44.7 billion in the corresponding quarter of 2017, thereby absorbing 15.4 per cent of the merchandise trade deficit. Transfers, otherwise referred to as secondary income, increased to KSh 120.2 billion in the third quarter of 2017 out of which KSh 51.3 billion was from external remittances. Consequently, the current account balance worsened by 28.9 per cent to a deficit of KSh 145.4 billion in the third quarter of 2017 compared to a deficit KSh 112.8 billion in the corresponding quarter of 2016.
Net financial inflows more than halved from a surplus of KSh 67.6 billion in the third quarter of 2016 to a surplus of KSh 27.7 billion in the third quarter of 2017. Gross official reserves decreased by 1.8 per cent from KSh 830.6 billion as at end of September 2016 to KSh 815.5 billion as at end of September 2017 translating to about 5.4 months of import cover.
Kenya’s economic growth is estimated to have decelerated to 4.4 per cent in the third quarter of 2017 compared to 5.6 per cent in a similar period of 2016. During the quarter, the macroeconomic fundamentals remained largely stable and supportive of growth. However, uncertainty associated with political environment coupled with effects of adverse weather conditions slowed down the performance of the economy. As a result, most sectors of the economy posted slower growths during the quarter under review compared to the same quarter of 2016.
The period under review registered the slowest growth since the fourth quarter of 2013 mainly due to suppressed performance in key sectors of the economy. Financial and insurance activities recorded the largest deceleration from 7.1 per cent in third quarter 2016 to 2.4 per cent in the period under review. Other industries that recorded notable slowdown include; manufacturing; health; accommodation and food services; mining and quarrying and education. On the other hand, accelerated growths were recorded in; professional, administration and support services; public administration; and real estate activities.
Inflation averaged at 7.5 per cent during the third quarter of 2017 compared to an average of 6.3 per cent during a similar quarter in 2016. The rise in inflation was mainly on account of a surge in prices of food and non-alcoholic beverages that started in the second quarter of 2017 and continued into the period under review. The increase in food prices was evidenced by comparably high wholesale prices of key food crops. This was principally attributable to adverse weather conditions that prevailed in the second quarter and for the better part of the third quarter of 2017. Weighted interest rates on commercial banks loans and advances declined to an average of 13.67 per cent in the third quarter of 2017 from 16.54 per cent during a similar quarter in 2016. This was mainly attributable to the capping of interest rates that started in September 2016. The Central Bank Rate (CBR) was maintained at 10.0 per cent throughout the quarter.
The Kenyan Shilling strengthened against the Pound Sterling and the Japanese Yen but weakened against the US Dollar and the Euro. Regionally, the Shilling gained against the Ugandan and Tanzanian currencies but lost against the South Africa Rand during the review quarter. The current account deficit worsened by 28.9 per cent to KSh 145.4 billion in the quarter under review from KSh 112.8 billion in third quarter of 2016. The worsening of the current account was mainly due to a faster growth in imports compared to that of exports that resulted to a deterioration in merchandise trade deficit. In the commodity market, the average Murban Adnoc crude oil prices increased by 10.2 per cent in the period under review to USD 51.05/Barrel from USD 46.32/Barrel recorded in the third quarter of 2016.
Kenya National Bureau of Statistics hereby releases monthly Consumer Price Indices (CPI) and rates of inflation, for December, 2017. These numbers were generated by conducting a survey of retail prices for a basket of household consumption goods and services, during the second and third weeks of the month under review. The prices were obtained from selected retail outlets in 25 data collection zones spread across Nairobi and 13 other urban centers.
The CPI increased by 0.54 per cent from 182.08 in November to 183.05 in December 2017. The overall year on year inflation stood at 4.50 per cent in December 2017.
Kenya has continued to improve its investment climate, with a goal of making the country a regional industrial and financial hub. This initiative has made Kenya attractive for both domestic and international firms seeking to do business in Kenya and in the region. The country has recorded an increase in the number of foreign companies setting up shop in the country and using Kenya as a hub in penetrating the Sub-Saharan markets. In order to establish the economic benefits from foreign investments; and to assess the impact of risks and vulnerabilities that may arise from these investments, collection of reliable and timely data on foreign assets and liabilities is significant for monitoring external transactions for purposes of planning and policy formulation. The foreign investment surveys are intended to provide information required for compilation of the Balance of Payments (BOP) and International Investment Position (IIP) statistics. In addition, the survey results inform investor decisions to choose Kenya as the preferred investment destination. The Foreign Investment Survey (FIS) 2016 is the fourth in the series since the launch of the surveys in 2010. It captured data on foreign private capital flows and stocks for the period 2014 and 2015. A total of 780 enterprises were targeted out of which 474 enterprises indicated that they had Foreign Assets and Liabilities (FAL).
The Leading Economic Indicators highlights trends in Consumer Price Indices (CPI) and inflation, interest rates, exchange rates, international trade, agriculture, energy, manufacturing, building and construction, tourism and transport. Consumer Price Index (CPI) decreased from 183.66 points in September 2017 to 182.50 points in October 2017. The overall rate of inflation dropped from 7.06 per cent to 5.72 per cent during the same period. In October 2017, the Kenyan Shilling appreciated against the major trading currencies except for the US Dollar and the Ugandan Shilling.
The average yield rate for the 91-day Treasury bills, which is a benchmark for the general trend of interest rates, decreased from 8.13 per cent in September 2017 to 8.09 per cent in October 2017 while the inter-bank rate rose from 5.52 per cent to 7.85 per cent over the same period.
The Nairobi Securities Exchange (NSE) 20 share index decreased from 3,751 points in September 2017 to 3,730 points in October 2017, while the total number of shares traded dropped from 556 million shares to 314 million shares during the same period. The total value of NSE shares traded dropped from KSh 16.2 billion in September 2017 to KSh 9.4 billion in October 2017.
Broad money supply (M3), a key indicator for monetary policy formulation, increased from KSh 2,988.64 billion in September 2017 to KSh 2,989.36 billion in October 2017. Gross Foreign Exchange Reserves dropped from KSh 1,085.54 billion in September 2017 to KSh 1,030.09 billion in October 2017. Net Foreign Exchange Reserves reduced from KSh 617.64 billion in September 2017 to KSh 570.28 billion in October 2017.