Private sector activity reported a rebound in growth characterised by stability in the macroeconomic environment following an election year.
Strong growth was reported in manufacturing, agriculture, electricity and water supply, transport and storage as well as wholesale and retail trade due to a continued expansion in the economy.
The most recent report by Kenya National Bureau of statistics shows the country’s economy grew 6.3 per cent between March and June as a result of favourable weather conditions backed by a fairly stable macroeconomic environment.
This was a 1.6 per cent growth compared to the 4.7 per cent GDP growth recorded the same period last year.
KNBS data shows the in the first half of the year agriculture contributed Sh1.67 trillion to the economy, manufacturing Sh349.41 billion, transport and storage Sh323.54 billion while wholesale and retail trade accounted for Sh311.46 billion.
“Accommodation and food service and Information and communication recorded the highest growths of 15.7 per cent and 12.6 per cent, respectively in the quarter under review,” the report stated.
Inflationary prices were also well under the Central Bank target ranging between 2.5 and 7.5 per cent. From January to November, the average recorded inflation stood at 4.6 per cent nearly half the rate recorded over the same period last year at 8.34 per cent.
This resulted in an overall improvement in business activity as firms were able to easily access raw material and in turn reduce operational costs.
There was also increased demand for goods both locally and in the foreign market which drove up firms’ output.
Private sector activity however took a slight dive during the third quarter of the year as firms readjusted their business models to new taxes imposed under the Finance Act 2018, especially the eight per cent Value Added Tax on fuel products.
“The decline in the PMI in the third quarter, which we largely believe was due to wanning business confidence and enhanced anxiety owing to the new fiscal year tax measures that were introduced, weighed on economic activity,” Stanbic economist Jibran Qureishi said.
Stanbic Bank’s Purchasing Managers’ Index shows the country’s private sector completed a full year of growth with November PMI recorded at 53.1. Although this was a slight dip from 54 in October,the report shows it was still a solid improvement.
“Costs remained relatively muted despite the Michuki transport rules which had raised costs earlier in the month as electricity and food prices declined,” Qureishi said.
The private sector still had to grapple with poor credit access over the year as the law capping interest rates on commercial loans was retained.
However, data by the Central Bank shows that all though banks remained tough on private sector lending, there was a significant improvement.
Lending to private firms grew 4.4 per cent in the 12 months to October compared to a two per cent growth recorded in the same period last year.
“Private sector credit growth was driven by strong growth in manufacturing, business services, finance and insurance, and building and construction, which grew by 14.9, 12.4, 9.1 and 7.2 per cent respectively,” Central Bank governor Patrick Njoroge said during the MPC meeting held on November 27.
He added more growth was expected with the continued expansion of the economy.
Stanbic upgraded its 2018 GDP estimate for Kenya to 5.8 per cent from 5.6 per cent previously supported by continued stability in private sector growth.