Provisional quarterly GDP estimates for the first quarter of 2017 show that Kenya’s economy expanded by 4.7 per cent measured against a similar period in 2016. The slowdown in growth was largely due to a contraction in the activities of agriculture as well as a deceleration in growth of financial intermediation and electricity supply. The quarter’s growth was negatively impacted on by drought that emanated from failure of the 2016 short rains and delay in the onset of the 2017 long rains. A slowdown in credit uptake also slowed economic growth during the period under review. There was a moderate buildup in inflationary pressures mainly due to significant increases in prices of food and beverages during the period under review.
In addition, a 62.2 per cent increase in the international oil prices during the quarter compared to the same quarter of 2016 led a notable rise in transport Consumer Price Index (CPI) component in the months of February and March. Consequently, inflation averaged at 8.8 per cent thereby overshooting the Central Bank’s upper limit of 7.5 per cent.
On the other hand, key macroeconomic indicators remained largely stable and therefore supportive of growth throughout the period. Interest rates dropped significantly reflecting the impact of the capping that became effective in September 2016. In the money market, the Kenyan Shilling strengthened against most of its major trading currencies. The most notable gain was a 12.1 per cent strengthening against the Pound Sterling. However, the Shilling weakened against the South African Rand, Yen and US Dollar during review period.
A number of key sectors recorded improved growths with that of accommodation and food services being the highest at 15.8 per cent from 10.4 per cent during the first quarter of 2016. Other major sectors whose growths improved significantly include; Wholesale and Retail trade; Real estate; Transport and Storage; and Information and Communication. Agriculture recorded the first contraction in gross value added since 2009 which was attributable to unfavourable weather conditions during the last quarter of 2016 and the first quarter of 2017. Electricity supply was also adversely impacted on by the shortage of rains resulting to slowed growth during the quarter under review. Finance and insurance sector’s growth slowed primarily on account of commercial bank’s reduced lending to the private sector. Figure 1 depicts the first quarter growths for the last 5 years.