Kenyan Economy Expands at Fastest Pace in Five Years in 2016By
Growth accelerated to 5.8% last year from 5.7% in 2016
Economy faces headwinds in 2017 from drought, credit squeeze
Kenya’s economy, East Africa’s largest, expanded at the fastest pace in five years in 2016, boosted by more construction and tourism.
Gross domestic product increased 5.8 percent last year, the most since 2011, from a revised 5.7 percent in 2015, Kenya National Bureau of Statistics Director General Zachary Mwangi told reporters Wednesday in Nairobi, the capital. Expansion could have been more robust had it not been for a sluggish final quarter, when drought hurt farming output.
Tourism grew 13.3 percent after contracting 1.3 percent in the previous year, KNBS said. Construction climbed 9.2 percent from 13.9 percent in 2015.
Tourism, among the nation’s largest foreign-exchange earnings together with exports of flowers, has rebounded after an end to travel advisories by European countries that followed attacks by militant groups.
Kenya is the world’s biggest black-tea exporter and agriculture, which accounts for about 25 percent of GDP, rose 4 percent from a revised 5.5 percent a year earlier, curbed by a drought. Manufacturing and the financial industries also expanded at a slower pace, 3.5 percent and 6.9 percent respectively. The two sectors grew at a revised 3.6 percent and 9.4 percent in 2015.
The country had forecast growth of 6 percent last year. The statistics agency revised 2015’s expansion upward from 5.6 percent.
The economy grew to 7.16 trillion shillings ($69.2 billion), and the population increased almost 3 percent to 45.4 million people.
The nation’s GDP growth may slow to 5.5 percent in 2017 as it grapples with the drought and the decline in private-sector credit, which slumped to 4 percent in February, the slowest pace since 2003, according to the Central Bank of Kenya. The International Monetary Fund forecasts output slowing to 5.3 percent this year and 5.8 percent in 2018.
President Uhuru Kenyatta, who will seek a second term at general elections on Aug. 8, introduced a law limiting interest charges on loans to 400 basis points above a key central bank rate, fulfilling a campaign pledge he made before coming to power in 2013.
Overall credit growth slowed to 6.4 percent last year from 20.8 percent in the previous period, the agency said. The deceleration in lending to businesses and individuals will constrain expansion of sectors that are reliant on borrowing from commercial banks, it said.
Growth may have softened in the first quarter of 2017 after reduced precipitation in the October-to-November rainy season, central bank Governor Patrick Njoroge said on April 12.
“We are more worried about 2017, which is not looking very pretty,” Faith Atiti, a senior economist at Nairobi-based Commercial Bank of Africa, said by phone.