The ‘Big Bad’ Kenyan Economy

Kenya’s economic growth kept up with the expected slowdown with second quarter GDP growth (2017) at 5.00% compared to 6.30% in the second quarter of 2016.

The slowdown in the agriculture, manufacturing, construction, transport and financial sectors largely contributed to the reduced activity.

The agriculture sector was hard hit by poor crop harvest caused by the effects of the drought in 2016 which led to a slowdown in the production of agricultural products in the manufacturing sector. As the effects of the drought wane and crop harvest improves, the agriculture and manufacturing sectors should realize a pickup in activity.

The transport sector could continue to face challenges primarily owing to the slow adjustment to the disruption caused by the SGR. The SGR contributed to a crowding out effect in transport routes (particularly) from Nairobi to the coastal regions. This then led to increased competition in the western routes from coastal (bus) companies.

Meanwhile, the interest rate controls law, deteriorating borrower risk profile and the search for good assets led to a general slowdown in credit to the private sector, currently below 2.00% (August 2017). This could perhaps explain the slowdown in the construction sector as access to credit became a challenge causing a delay in construction projects despite the increase in the number of approved projects.

Overall, the shifting and uncertain political landscape will contribute to a further economic slowdown which could potentially extend to early 2018.

~AR~

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