SLOWDOWN

Credit crunch hits Kenya's construction loans in Q1 2024

Credit extended to enterprises in the construction sector grew by 0.6 per cent

In Summary

•The construction sector has been one of the fastest growing in Kenya and contributed 7.1 percent of the GDP in 2022.

•The quantity of imported bitumen decreased from 25,482.6 metric tonnes recorded in the first quarter of 2023 to 17,237.8 metric tonnes in the period under review.

President William Ruto engaging a construction worker at Kibra, Soweto B Social affordable housing project in Nairobi on November 22, 2023
President William Ruto engaging a construction worker at Kibra, Soweto B Social affordable housing project in Nairobi on November 22, 2023
Image: PCS

The availability of funds from housing fund levy failed to spur activities in Kenya’s construction sector in the first three months of the year 2024 leading to a deceleration.

The latest Kenya National Bureau of Statistics (KNBS) Quarterly Gross Domestic Product Report shows that growth in the construction sector dropped to 0.1 percent in the three months to March 2024, down from a growth of three percent during a similar period in 2023.

The construction sector has been one of the fastest growing in Kenya and contributed 7.1 percent of the GDP in 2022.

In the first three months of the year, loans channeled towards the sector also decelerated massively compared to 2023.

KNBS says that credit extended to enterprises in the construction sector grew by 0.6 per cent to stand at Sh140.9 billion as at March 2024, compared to a 4.8 per cent increase in the same period in 2023.

“Cement consumption declined by 12.7 per cent to stand at 1,949.9 thousand metric tonnes from 2,234.2 thousand metric tonnes in the corresponding period of 2023,” KNBS says in the quarterly report.

The quantity of imported bitumen decreased from 25,482.6 metric tonnes recorded in the first quarter of 2023 to 17,237.8 metric tonnes in the period under review.

During the quarter under review, the quantity of iron and steel imports, rose to 230,800.6 metric tonnes from 198,925.7 metric tonnes in the corresponding quarter of 2023.

According to KNBS, overall growth in the construction industry moderated to 3 percent in 2023, down from 5 percent in the previous year.

This deceleration reflected broader economic challenges that hit affecting the country, including fiscal adjustments and fluctuating global commodity prices.

The report further says that in the first quarter of 2024, Kenya's economy grew by 5.0 per cent, down slightly from 5.5 per cent in the same quarter of 2023.

The growth was driven by strong performances in Agriculture, Forestry, and Fishing which increased by 6.1 per cent, the real estate grew by 6.6 per cent, financial and Insurance reported a 7 per cent, Information and Communication (7.8 per cent), and Accommodation & Food Services (28.0 per cent).

Transportation activities also performed well compared to the same period in 2023, benefiting from robust agricultural output.

The hospitality sector, including accommodation and food services, sustained growth momentum initiated during the 2022 recovery from the COVID-19 pandemic.

Additionally, the financial and insurance sectors accelerated their growth from 5.9 per cent in the first quarter of 2023 to 7.0 per cent in the latest review period.

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