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Country Report Kenya February 2011
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HTMLEconomic performance: Economic growth quickens in the third quarter
The latest data from the Kenya National Bureau of Statistics (KNBS) show that real GDP rose by 6.1% year on year in the third quarter of 2010, the fastest rate since the fourth quarter of 2007, before post-election violence, drought and the global downturn derailed the economy. Growth in the first quarter (4.7%) and second quarter (5.3%) was revised down a little, but growth in the first three quarters was 5.4% higher than a year earlier. This impressive performance stems from favourable rainfall-which boosted agriculture (the largest sector; 22% of GDP), agro-industry and hydroelectric power generation-a fiscal stimulus and the global and regional rebound.
The combination of better agricultural supplies, abundant and cheaper power, and stronger export demand gave a strong boost to manufacturing, which grew by 7.8% in the third quarter (and in the first three quarters). Construction is also booming, spurred by public projects. As a result, the wider industrial sector grew by a swift 11.7% in the third quarter (and by 9.6% in the first three quarters). Performance in the service sectors was mixed. Transport and communications was sluggish (3.2% in the first three quarters) because of transport bottlenecks, while wholesale and retail (4.2% in January to September) was slack, suggesting that households are lagging the wider recovery, pending new job creation. Financial intermediation remains the star performer, surging by 20.3% in the third quarter (and by 15.8% in the first three quarters), underpinned by growth in demand for-and supply of-banking services. Separate data show that banking sector pre-tax profits jumped by 50% in the first ten months of 2010 to KSh62.6bn (US$772m).
However, third quarter growth of 6.1% could be a high point in the recovery. Growth in the fourth quarter is likely to be lower because of much drier weather, heavy snow in Europe (which disrupted aviation, affecting horticulture exports and tourism) and the higher base level of a year earlier. Assuming growth of 4% in the fourth quarter, full year growth will come in at 5%-slightly higher than our earlier prediction. Growth in the first quarter of 2011 will be affected by a worsening drought, which is cutting tea and hydroelectric output. The damage will be more severe if the drought persists into the second quarter, the main rainy season.
| Real GDP growth by sector | ||||||
| (% real change, year on year, unless otherwise indicated) | ||||||
| 2009 | 2010 | |||||
| Sector (ranked by size) | Year | 3 Qtr | 4 Qtr | 1 Qtr | 2 Qtr | 3 Qtr |
| Agriculture (incl forestry & fishing) | -2.4 | -3.3 | -1.3 | 5.5 | 4.6 | 6.8 |
| Transport & communications | 6.4 | 10.4 | 2.7 | 4.8 | 2.1 | 2.6 |
| Wholesale & retail trade | 1.5 | 0.7 | 11.4 | 3.7 | 4.4 | 4.6 |
| Manufacturing | 2 | -0.5 | 4.1 | 8.2 | 7.4 | 7.8 |
| Public administration (incl education) | 2.3 | 1.6 | 3.3 | 1.8 | 2.8 | 3.0 |
| Real estate, renting & business services | 3.0 | -6.6 | -3.4 | 1.7 | -1.8 | 1.7 |
| Financial intermediation | 4.6 | 7.1 | 7.7 | 11.0 | 16.0 | 20.3 |
| Construction | 14.1 | 2.4 | 22.2 | 4.8 | 18.0 | 14.6 |
| Power & water | -3.1 | -4.1 | -11 | 1.5 | 11.9 | 24.4 |
| Hotels & restaurants | 42.8 | 1.7 | -1.8 | 1.8 | 6.1 | 9.5 |
| Mining & quarrying | -4.2 | -7.0 | 9.3 | 21.5 | 8.5 | 4.4 |
| GDP (incl others) | 2.6 | 0.5 | 3.5 | 4.7 | 5.3 | 6.1 |
| Seasonally adjusteda | - | 0.4 | 1.6 | 3.0 | 0.1 | 1.3 |
| a Compared with the previous quarter. | ||||||
| Source: Kenya National Bureau of Statistics. | ||||||
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