The Kenyan economy slowed down to 5.5% in the second quarter of 2015 compared to 6% over the previous year, weighed down by the slowing construction industry, the financial sector’ s poor performance and the slow recovery from a tourism slump.
The Kenya’s increasingly buoyant middle class, whose presence has been driving the wholesale and retail sectors and seen to boost the new demand for flashy shopping malls, has already seen the manufacturing sector rising from the ashes as a result of growing demand for canned food.
However, the manufacturing sector, which saw a small gain from the increased production of containers used for packaging canned food, slowed down to a paltry 4.5% compared to 8.3% in 2014.
“The growth in the sector was partly attributed to the reduced cost of inputs such as electricity during the second quarter of 2015,” Zachary Mwangi, the Director-General of the Kenya National Bureau of Statistics (KNBS) said. The production of soft-drinks grew by a massive 19.2% during the period.
The transport sector is estimated to have grown by 6.2% compared to 5.7 % during the same quarter of 2014. The communication sector on the other hand recorded a slower growth of 7.6% compared to 8.1% growth in the same quarter of 2014.
The consumption of light diesel, a key growth indicator for the transport sector, increased 13.3% during the second quarter 2015 driven by the decline in fuel prices.
“The quarter was characterized by a fairly stable macroeconomic environment supported by a slowdown in inflation and decline in interest rates. The country experienced good rains that led to improved agricultural activities despite suppressed demand of key agricultural exports,” Mwangi said.
The Central Bank of Kenya (CBK) said last week, a business confidence survey carried out amongst the local business community, including the banks and the non-banks, showed strong confidence for 5.5% economic growth rate.
Kenya’s small banks were the most optimistic, putting the average growth potential for 2015 at 5.7%. The Central Bank says the higher growth premiums has been pegged on increased foreign direct investment, public investment in infrastructure and the expected recovery of the tourism sector.
The construction sector recorded a decelerated growth of 9.9% during the second quarter 2015 compared to a growth of 16.6% during the same quarter in 2014.
Commercial bank credit extended to the sector grew from Ksh 77.144 billion (just over $720 million) in 2014 to an estimated Ksh 87.544 billion ($820 million) in 2015. Cement consumption increased by 4.8% to reach some 459,022 metric tonnes.
Some local firms revised their growth expectations citing a slowdown in the credit growth to finance investments as a result of the high interest rates, risks associated with focused El Nino rains and the weak global economy.
In Kenya, the slowing demand for imports was reflected in decline in the volume of cargo handled at the port of Mombasa.
The Kenyan shilling depreciated significantly against the US dollar, held firm against the Sterling Pound but appreciated significantly against all the other major trading currencies.
The banking sector grew by 6% compared to 7.9% in 2014. Domestic credit by commercial banks rose by 29.2 % in 2015 compared to a growth of 14.6% over the same period in 2014.
Similarly, credit to the private sector expanded by 20.6 % from Ksh 1,736.1 billion in the second quarter of 2014 to Ksh 2,094.0 billion during the same period of 2015. Broad money supply grew by 17.6% to Ksh 3,196.9 billion in the second quarter of 2015 compared to a growth of 19.3 per cent recorded in a similar period in 2014.
