This is on recovery of the agriculture sector, which took a hit last year, contracting by 1.6 per cent.
•Leading indicators point to an already strong economic performance in the first quarter of this year mainly driven by activity in the service and recovery in agriculture.
Image: FILE
Kenya’s economy is expected to record a strong performance this year despite high inflation and uncertainty in global markets, which have traditionally affected growth prospects.
The country’s real GDP is projected to grow at 5.5 per cent, Central Bank of Kenya (CBK) forecasts, up from 4.8 per cent last year.
This is on recovery of the agriculture sector, which took a hit last year, contracting by 1.6 per cent as captured in the Economic Survey 2023 by the Kenya National Bureau of Statistics (KNBS).
Most of the key agriculture sub-sectors recorded declined performance as drought in most parts of the country severely affected production.
During the year, maize production decreased from 36.7 million bags in 2021 to 34.3 million bags in 2022.
Similarly, tea production decreased from 5.37 million tonnes to 5.35 million tonnes on account of depressed rainfall in tea-growing areas.
The volume of horticultural exports decreased from 4.05 million tonnes to 3.9 million tonnes in 2022.
The quantity of marketed milk decreased from 801.9 million litres in 2021 to 754.3 million litres in 2022, largely due to scarcity of fodder for livestock.
However, the volume of sugarcane deliveries and coffee production increased.
“It is clear agriculture was hit hard, two years in a row of contraction…There will be a stronger rebound in 2023 but will depend on the rains that are there, we have seen adequate rains,” CBK Patrick Njoroge said.
This year’s growth is also pegged on a strong service sector with accommodation and food services leading at a growth projection of 11.3 per cent, up from 9.3 per cent last year.
Others are information and communication (8.2%), professional administration and support services (6.7%) transport and storage (6.5%), wholesale and retail trade (6%), among others.
The manufacturing sector is also expected to pick this year, albeit at a lower pace with a growth of 3.5 per cent compared to the 2.9 per cent recorded last year.
“The sectors are picking up, there are a few surprises but I think the real surprise is agriculture,” Njoroge said.
Leading indicators point to an already strong economic performance in the first quarter of this year (January-March), mainly driven by activity in the service and recovery in agriculture.
Respondents in CBK’s surveys in May indicated optimism attributed to improved weather conditions, which are expected to support agricultural production, easing inflation and resilience of the private sector.
However, inflation, the measure of the cost of living, took a twist in May from projections of a drop, as it increased to eight per cent from 7.9 per cent.
“The increase in inflation was largely due to increase in prices of commodities under food and non-alcoholic beverages (10.2%); and housing, water, Electricity, gas and other fuels (9.7%); and transport (10.1%) between May 2022 and May 2023,” KNBS director general Macdonald Obudho said in the monthly update, on Wednesday.
These three divisions account for over 57 per cent of the weights of the 13 broad categories.
Prices of commodities under personal care, social protection and miscellaneous goods and services recorded an increase of 8.1 per cent over the period.
While CBK surveys captured positive sentiments in the private sector, respondents were concerned about the proposed increase in taxation, rise in electricity and fuel prices, and the weakening of the shilling against the US dollar and other major currencies.
A weak shilling means traders are spending more on the dollar to import goods, including inputs for sectors such as agriculture, petroleum products, raw material for the manufacturing sector, among others.
Last year, growth slowed down to 4.8 per cent from 7.6 per cent in 2021, when the country witnessed a strong post-Covid pandemic recovery.